During the first month of operations ended July 31, Head Gear Inc. manufactured 6,400 hats, of which
Question:
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:
During August, Head Gear Inc. manufactured 4,000 hats and sold 5,200 hats. Operating data for August are summarized as follows:
Instructions
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 Head Gear Inc. operate more profitably in July or in August? Explain
Step by Step Answer:
Financial And Managerial Accounting
ISBN: 9781337119207
14th Edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac