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During the first month of operations ended March 31, 2016, Hip and Conscious Clothing Company produced 55,500 designer cowboy hats, of which 51,450 were sold.

During the first month of operations ended March 31, 2016, Hip and Conscious Clothing Company produced 55,500 designer cowboy hats, of which 51,450 were sold. Operating data for the month are summarized as follows:

1

Sales

$771,750.00

2

Manufacturing costs:

3

Direct materials

$471,750.00

4

Direct labor

127,650.00

5

Variable manufacturing cost

61,050.00

6

Fixed manufacturing cost

55,500.00

715,950.00

7

Selling and administrative expenses:

8

Variable

$36,015.00

9

Fixed

25,725.00

61,740.00

During April, Hip and Conscious Clothing produced 47,400 designer cowboy hats and sold 51,450 cowboy hats. Operating data for April are summarized as follows:

1

Sales

$771,750.00

2

Manufacturing costs:

3

Direct materials

$402,900.00

4

Direct labor

109,020.00

5

Variable manufacturing cost

52,140.00

6

Fixed manufacturing cost

55,500.00

619,560.00

7

Selling and administrative expenses:

8

Variable

$36,015.00

9

Fixed

25,725.00

61,740.00

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

Problem:

1a. Using the absorption costing concept, prepare income statements for (a) March and (b) April. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. Less, Plus or colons (:) will automatically appear if required. If a net loss is incurred, enter that amount as a negative number using a minus sign. The following income statement is for March.

1b. Using the absorption costing concept, prepare income statements for (a) March and (b) April. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. Less, Plus or colons (:) will automatically appear if required. If a net loss is incurred, enter that amount as a negative number using a minus sign. The following income statement is for April.

2a. Using the variable costing concept, prepare income statements for (a) March and (b) April. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. Less, Plus or colons (:) will automatically appear if required. If a net loss is incurred, enter that amount as a negative number using a minus sign. The following income statement is for March.

2b. Using the variable costing concept, prepare income statements for (a) March and (b) April. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. Less, Plus or colons (:) will automatically appear if required. If a net loss is incurred, enter that amount as a negative number using a minus sign. The following income statement is for April.

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