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