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Answer 1a, 1b, 2a, and 2b

Absorption and Variable Costing Income Statements for Two Months and Analysis During the first month of operations ended July 31, Head Gear Inc. manufactured 6,400 hats, of which 5,200 were sold. Operating data for the month are summarized as follows: Sales $104,000 Manufacturing costs: Direct materials Direct labor Variable manufacturing cost Fixed manufacturing cost Selling and administrative expenses: Variable $47,360 22,400 12,160 15,360 97,280 $10,920 5,200 Fixed 16,120 During August, Head Gear Inc. manufactured 4,000 hats and sold 5,200 hats. Operating data for August are summarized as follows: $104,000 Sales Manufacturing costs: Direct materials Direct labor Variable manufacturing cost Fixed manufacturing cost Selling and administrative expenses: Variable Fixed $29,600 14,000 7,600 15,360 66,560 $10,920 5,200 16,120 Required: 15,360 66,560 Fixed manufacturing cost Selling and administrative expenses: Variable Fixed $10,920 5,200 16,120 Required: 1a. Prepare income statement for July using the absorption costing concept. Head Gear Inc. Absorption Costing Income Statement For the Month Ended July 31 Sales 104,000 Cost of goods sold: Cost of goods manufactured Inventory, July 31 Total cost of goods sold Gross profit Selling and administrative expenses Operating income Feedback Check My Work 1a. Sales - cost of goods manufactured - ending inventory) = Gross profit: gross profit - selling and administrative expenses = operating income "(Manufactured Units - Sold units) x (total manufacturing costs/ manufactured units) 1b. Prepare income statement for August using the absorption costing concept. Head Gear Inc. Absorption Costing Income Statement For the Month Ended August 31 Sales 104,000 Cost of goods sold: Inventory, August 1 Cost of goods manufactured Total cost of goods sold Gross profit Selling and administrative expenses Operating income Feedback Check My Work 1b. Sales - (cost of goods manufactured - ending inventory) = Gross profit: gross profit - selling and administrative expenses = operating income "(Manufactured Units - Sold units) x (total manufacturing costs/manufactured units) 2a. Prepare income statement for July using the variable costing concept. Head Gear Inc. Variable Costing Income Statement For the Month Ended July 31 Variable cost of goods sold: Droit Sot Most 2a. Prepare income statement for July using the variable costing concept. Head Gear Inc. Variable Costing Income Statement For the Month Ended July 31 Variable cost of goods sold: Fixed costs: Feedback Check My Work 2a. Sales - variable cost of goods sold = Manufacturing margin: Manufacturing margin - variable selling and administrative expenses = Contribution margin: Contribution margin-(fixed manufacturing costs + fixed selling and administrative expenses) = operating income *Variable cost of goods sold = Variable cost of goods manufactured - [(Manufactured Units - Sold units) x (variable manufacturing costs/manufactured units)] 2b. Prepare income statement for August using the variable costing concept. 2b. Prepare income statement for August using the variable costing concept. Head Gear Inc. Variable Costing Income Statement For the Month Ended August 31 Variable cost of goods sold: Fixed costs: Feedback Check My Work 2b. Sales - variable cost of goods sold = Manufacturing margin: Manufacturing margin-variable selling and administrative expenses = Contribution margin: Contribution margin- (fixed manufacturing costs + fixed selling and administrative expenses) = operating income *Variable cost of goods sold = Variable cost of goods manufactured - [(Manufactured Units - Sold units) x (variable manufacturing costs/manufactured units)]

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