During the first month of operations ended May 31, Big Sky Creations Company produced 55,500 designer cowboy boots, of which 51,350 were sold. Operating data for the month are summarized as follows: 1 Sales $924,300.00 3 $416,250.00 111,000.00 2 Manufacturing costs: Direct materials 4. Direct labor 5 Variable manufacturing cost Fixed manufacturing cost 7 Selling and administrative expenses: Variable 55,500.00 6 55,500.00 638,250.00 8 $30,810.00 Fixed 25,675.00 56,485.00 During June, Big Sky Creations produced 47,200 designer cowboy boots and sold 51,350 cowboy boots. Operating data for June are summarized as follows: 1 Sales $924,300.00 2 Manufacturing costs: 3 Direct materials $354,000.00 4 Direct labor 94,400.00 5 47,200.00 6 55,500.00 551,100.00 Variable manufacturing cost Fixed manufacturing cost 7 Selling and administrative expenses: 8 Variable $30,810.00 9 Fixed 25,675.00 56,485.00 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. 36. 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. Big Sky Creations Company Absorption Costing Income Statement (Label) 1 2 (Label) 3 4 5 6 7 8 16. Using the absorption costing concept, prepare income statements for June. 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. Big Sky Creations Company Absorption Costing Income Statement (Label) 1 2 Label 3 4 5 6 7 8 2a. Using the variable 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. Big Sky Creations Company Variable Costing Income Statement (Label) 1 2 (Label) 3 4 5 6 7 8 9 (Label) 10 11 12 26. Using the variable costing concept prepare income statements for June. 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. Big Sky Creations Company Variable Costing Income Statement (Label) 1 2 Label 3 4 5 6 7 8 9 Label 10 11 12 Final Questions 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 statement costing income 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 income statement costing 4. Based on your answers to (1) and (2), did Big Sky Creations Company operate more profitably in May or in June? Explain. under the variable costing concept. The difference in operating income Big Sky Creations Company was reported under the absorption costing concept is due to allocating to the
