1. Using the absorption costing concept, prepare income statements for (a) July and (b) August

2. Using the variable costing concept, prepare income statements for (a) July and (b) August.

3. Explain the reason for the differences in the amount of operating income in (1) and (2) for July.

4. Explain the reason for the differences in the amount of operating income in (1) and (2) for August

5. Based on your answers to (1) and (2), did Head Gear Inc. operate more profitably in July or in August? Explain

During the fist month of operations ended July 31, Head Goar Inc manufactured 6,400 hats, of which 5,200 were sold Operating data for the mont summarized as follows Sales $104,000 Manufacturing costs Direct materials $47,360 Direct labor 22,400 Variable manufacturing cost =12,160 Fixed manufacturing cost 15,36097280 Selling and administrative expenses VariableFixed510,9205,20016,120 During August. Head Gear Inc manufactured 4,000 hats and sold 5,200 hats. Operating data for August are summarized as follows: Sales \$104,000 Manufacturing costs Direct materials $29.600 Direct labor 14,000 Variablemanufacturing cost 7,600 Flxed manufucturing cost 15,360 : 66.560 Selling and administrative expenses: Varlable$10.920Flued5.20016.120 Instructions Using the absorption costing concept prepare income statements for (a) July and (b) August Using the variable costing concept prepate income statements for (a) July and (b) August Explain the reasos for the differences in the amount of operating incorne in (1) and (2) for July. Explain the reason for the differences in the amount of operating income in (1) and (2) for August. Based on your answers to (1) and (2). Sid Hedd Gear Ine oporate more profitably in July or in August? Explain