Question
During the first month of operations ended March 31, 2016, Hip and Conscious Clothing Company produced 55,000 designer cowboy hats, of which 51,150 were sold.
During the first month of operations ended March 31, 2016, Hip and Conscious Clothing Company produced 55,000 designer cowboy hats, of which 51,150 were sold. Operating data for the month are summarized as follows:
1 | Sales |
| $895,125.00 |
2 | Manufacturing costs: |
|
|
3 | Direct materials | $401,500.00 |
|
4 | Direct labor | 137,500.00 |
|
5 | Variable manufacturing cost | 60,500.00 |
|
6 | Fixed manufacturing cost | 55,000.00 | 654,500.00 |
7 | Selling and administrative expenses: |
|
|
8 | Variable | $40,920.00 |
|
9 | Fixed | 25,575.00 | 66,495.00 |
During April, Hip and Conscious Clothing produced 47,300 designer cowboy hats and sold 51,150 cowboy hats. Operating data for April are summarized as follows:
1 | Sales |
| $895,125.00 |
2 | Manufacturing costs: |
|
|
3 | Direct materials | $345,290.00 |
|
4 | Direct labor | 118,250.00 |
|
5 | Variable manufacturing cost | 52,030.00 |
|
6 | Fixed manufacturing cost | 55,000.00 | 570,570.00 |
7 | Selling and administrative expenses: |
|
|
8 | Variable | $40,920.00 |
|
9 | Fixed | 25,575.00 | 66,495.00 |
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?
|
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