During the first month of operations ended January 31, 2015, Hip and Conscious Clothing Company produced 55,500 designer cowboy hats, of which 51,450 were sold. Operating data for the month are summarized as follows:

During February, Hip and Conscious Clothing produced 47,400 designer cowboy hats and sold 51,450 cowboy hats. Operating data for February are summarized as follows:

Instructions
1. Using the absorption costing concept, prepare income statements for
(a) January
(b) February.
2. Using the variable costing concept, prepare income statements for
(a) January
(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 Hip and Conscious Clothing Company operate more profitably in January or in FebruaryExplain.

Transcribed Image Text:

771,750 Sales Manufacturing costs: Direct materials.... Direct labor 127,650 61,050 715,950 Selling and administrative expenses: 36,015 61,740 Sales Manufacturing costs $771,750 $402900 109,020 52,140 55500 9560 Selling and administrative expenses: 61740