During the first month of operations ended July 31, 2012, Lids R€™ Us Inc. manufactured 8,000 hats, of which 6,500 were sold. Operating data for the month are summarized as follows:

During August, Lids R€™ Us Inc. manufactured 5,000 hats and sold 6,500 hats. Operating data for August are summarized as follows:

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. 

a.   Explain the reason for the differences in the amount of income from operations in (1) and (2) for July.
b.   Explain the reason for the differences in the amount of income from operations in (1) and (2) for August.
4. Based on your answers to (1) and (2), did Lids R€™ Us Inc. operate more profitably in July or in August? Explain.

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Sales ... Baking costs: Direct materials. Direct labor Variable manufacturing cost Fixed manufacturing cost Selling and administrative expenses: Variable ... Fixed $162,500 $73,600 35,200 19,200 24,000 ... 152,000 $16,900 24,700 7,800 Sales Baking costs: Direct materials. Direct labor Variable manufacturing cost Fixed manufacturing cost Selling and administrative expenses: Variable Fixed $162,500 $46,000 22,000 12,000 24,000 104,000 $16,900 24,700 7,800