(NOTE: OPTIONS FOR #3 ARE: FIXED, VARIABLE, or ABSORPTION)

I GUESS SINCE THESE IMAGES ARE SOMEHOW NOT CLEAR TRY THIS:

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		$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 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		$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) 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.

Instructions 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 $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 Instructions 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 $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 Instructions 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) 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. Absorption Costing Income Statement-May 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 (1) 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 For the Month Ended May 31 1 Sales $895,125.00 2 Cost of goods sold: 3 Inventory, May 31 4 Cost of goods manufactured 654,400.00 5 Total cost of goods sold 6 Gross profit $286,440.00 7 Selling and administrative expenses 66,495.00 8 Operating income $219,945.00 Absorption Costing Income Statement-June 1b. 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 For the Month Ended June 30 1 Sales $895,125.00 2 Cost of goods sold: 3 Inventory, June 1 4 Cost of goods manufactured 5 Total cost of goods sold 6 Gross profit $278,740.00 7 Selling and administrative expenses 66,495.00 8 Operating income $212,245.00 Variable Costing Income Statement-May 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 2b. 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 Tillal 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 costing income statement. 36. 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 costing income statement, costing income statement. expensed on the but not on the 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 Big Sky Creations Company was variable costing concept. The difference in operating income reported under the absorption costing concept is due to allocating to the Labels and Amount Descriptions 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 Labels and Amount Descriptions 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