During the first month of operations ended May 31, Big Sky Creations Company produced 55,000 designer cowboy boots, of which 51,150 were sold. Operating data for the month are summarized as follows: 1 Sales 2 Manufacturing costs: 3 Direct materials $895,125.00 $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 June, Big Sky Creations produced 47,300 designer cowboy boots and sold 51,150 cowboy boots. Operating data for June are summarized as follows: 1 Sales 2 Manufacturing costs: $895,125.00 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: 00 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) 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. Labels June 30 Cost of goods sold Fixed costs For the Month Ended June 30 For the Month Ended May 31 May 31 Variable cost of goods sold Amount Descriptions Contribution margin Contribution margin ratio Cost of goods manufactured Fixed manufacturing costs Fixed selling and administrative expenses Gross profit Operating income Inventory, June 1 Inventory, May 31 Operating loss Manufacturing margin Planned contribution margin Sales Sales mix Selling and administrative expenses Total cost of goods sold Total fixed costs Total variable cost of goods sold Variable cost of goods manufactured Variable selling and administrative expenses Absorption Costing Income Statement-May 1 2 (Label) 3 4 ++ 5 6 7 8 Big Sky Creations Company Absorption Costing Income Statement (Label) Absorption Costing Income Statement-June Income Statement Instructions 1 2 (Label) 3 4 5 6 7 8 Big Sky Creations Company Absorption Costing Income Statement (Label) Variable Costing Income Statement-May Big Sky Creations Company Variable Costing Income Statement (Label) 1 2 (Label) 3 4 5 6 7 8 9 (Label) 10 11 12 112 13 Variable Costing Income Statement-June Big Sky Creations Company Variable Costing Income Statement (Label) 1 2 (Label) 3 4 5 6 7 8 9 (Label) 10 11 12 13 3a. Explain the reason for the differences in operating income in (1) and (2) for May. For May, Operating income 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 operating income in (1) and (2) for June. For June, Operating income reported under costing is less than that reported under costing due to part of manufacturing costs from May 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 Big Sky Creations Company operate more profitably in May or in June? Explain. Big Sky Creations Company was operating income reported under the absorption costing concept is due to allocating under the variable costing concept. The difference in to the