During the first month of operations ended May 31, Big Sky Creations Company produced 56,000 designer cowboy boots, of which 52,000 were sold. Operating data for the month are summarized as follows: 1 Sales $858,000.00 2 Manufacturing costs: Direct materials Direct labor 3 $408,800.00 128,800.00 4 5 5 Variable manufacturing cost 61,600.00 6 Fixed manufacturing cost 56,000.00 655,200.00 4 Direct labor 128,800.00 5 Variable manufacturing cost 61,600.00 56,000.00 655,200.00 6 Fixed manufacturing cost 7 Selling and administrative expenses: 8 Variable $31,200.00 26,000.00 9 Fixed 57,200.00 During June, Big Sky Creations produced 48,000 designer cowboy boots and sold 52,000 cowboy boots. Operating data for June are summarized as follows: 1 Sales $858,000.00 $350,400.00 110,400.00 2 Manufacturing costs: 3 Direct materials Direct labor 5 Variable manufacturing cost 6 Fixed manufacturing cost 7 Selling and administrative expenses: 52,800.00 56,000.00 569,600.00 8 Variable $31,200.00 Fixed 26,000.00 57,200.00 Required: 1. Using the absorption costing concept, prepare income statements for (a) May and (b) June. * 2. Using the variable costing concept, prepare income statements for (a) May and (b) June. * 3a. Explain the reason for the differences in operating income in (1) and (2) for May. 3b. Explain the reason for the differences in operating income in (1) and (2) for June. 4. Based on your answers to (1) and (2), did Big Sky Creations Company operate more profitably in May or in June? Explain. * Be sure to complete the statement heading. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon () will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. 1a. Using the absorption costing concept, prepare income statements for May. Be sure to complete the statement heading. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon () will automatically appear if it is required. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. Score: 20/65 Big Sky Creations Company Absorption Costing Income Statement For the Month Ended May 31 1 Sales $858,000.00 2 Cost of goods sold: For the Month Ended May 31 1 Sales $858,000.00 2 Cost of goods sold: Inventory. May 31 3 5 7 8
