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?

* 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.

Labels
April 30, 2016
Fixed costs
For the Month Ended April 30, 2016
For the Month Ended March 31, 2016
March 31, 2016
Amount Descriptions
Beginning inventory
Contribution margin
Contribution margin ratio
Cost of goods manufactured
Cost of goods sold
Ending inventory
Fixed manufacturing costs
Fixed selling and administrative expenses
Gross profit
Income from operations
Loss from operations
Manufacturing margin
Planned contribution margin
Sales
Sales mix
Selling and administrative expenses
Variable cost of goods manufactured
Variable cost of goods sold
Variable selling and administrative expenses

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.

Hip and Conscious Clothing Company

Absorption Costing Income Statement

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2	Cost of goods sold:
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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.

Hip and Conscious Clothing Company

Absorption Costing Income Statement

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2	Cost of goods sold:
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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.

Hip and Conscious Clothing Company

Variable Costing Income Statement

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2	Variable cost of goods sold:
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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.

Hip and Conscious Clothing Company

Variable Costing Income Statement

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2	Variable cost of goods sold:
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3a. Explain the reason for the differences in the amount of income from operations in (1) and (2) for March.

For March, income from operations reported under costing exceeds that reported under costing due to part of manufacturing costs that are expensed on the costing income statement, but not on the costing income statement.

3b. Explain the reason for the differences in the amount of income from operations in (1) and (2) for April.

For April, income from operations reported under costing is less than that reported under costing due to part of manufacturing costs from March that are expensed on the costing income statement, but not on the costing income statement..

4. Based on your answers to (1) and (2), did Hip and Conscious Clothing Company operate more profitably in March or in April?

The company was equally profitable in March and April under the variable costing concept.

The company was more profitable in March.

The company was more profitable in April.

The company was equally profitable in March and April under the absorption costing concept.