During the first month of operations ended January 31, 2014, Head Gear Inc. manufactured 6,400 hats, of which 5,200 were sold. Operating data for the month are summarized as follows:

During February Head Gear Inc. manufactured 4,000 hats and sold 5,200 hats. Operating data for February are summarized as follows:

Instructions
1. Using the absorption costing concept, prepare income statements for (a) January and (b) February.
2. Using the variable costing concept, prepare income statements for (a) January and (b) February.
3. a. Explain the reason for the differences in the amount of income from operations in (1) and (2) for January.
b. Explain the reason for the differences in the amount of income from operations in (1) and (2) for February 4. Based on your answers to (1) and (2), did Head Gear Inc. operate more profitably in January or in FebruaryExplain.

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$104000 Sales Manufacturing costs: Direct labor. 22,400 12,160 15360 97280 Fixed manufacturing cost . . . . Selling and administrative expenses: 5.200 16,120 $104000 Sales Manufacturing costs: $29,600 14,000 7,600 Direct labor Fixed manufacturing cost .. .. 15,360 66,560 Selling and administrativeexpenses: $10,920 Fixed 5,200 16,120