During the first month of operations ended July 31, Western Creations Company produced 55,000 designer cowboy hats, of which 51,900 were sold. Operating data for the month are summarized as follows:

1	Sales		$804,450.00
2	Manufacturing costs:
3	Direct materials	$467,500.00
4	Direct labor	126,500.00
5	Variable manufacturing cost	77,000.00
6	Fixed manufacturing cost	55,000.00	726,000.00
7	Selling and administrative expenses:
8	Variable	$25,950.00
9	Fixed	25,950.00	51,900.00

During August, Western Creations produced 48,800 designer cowboy hats and sold 51,900 cowboy hats. Operating data for August are summarized as follows:

1	Sales		$804,450.00
2	Manufacturing costs:
3	Direct materials	$414,800.00
4	Direct labor	112,240.00
5	Variable manufacturing cost	68,320.00
6	Fixed manufacturing cost	55,000.00	650,360.00
7	Selling and administrative expenses:
8	Variable	$25,950.00
9	Fixed	25,950.00	51,900.00

	Required:
1.	Using the absorption costing concept, prepare income statements for (a) July and (b) August.*
2.	Using the variable costing concept, prepare income statements for (a) July and (b) August.*
3a.	Explain the reason for the differences in the amount of income from operations in (1) and (2) for July.
3b.	Explain the reason for the differences in the amount of income from operations in (1) and (2) for August.
4.	Based on your answers to (1) and (2), did Western Creations Company operate more profitably in July or in August? Explain.