Absorption and Variable Costing Income Statements for Two Months and Analysis During the first month of operations ended July 31, Head Gear Inc. manufactured 24,600 hats, of which 22,900 were sold. Operating data for the month are summarized as follows: Sales $187,780 Manufacturing costs: $115,620 Direct materials 29,520 Direct labor Variable manufacturing cost 14,760 Fixed manufacturing cost 12,300 172,200 Selling and administrativee expenses: Variable $9,160 6,690 Fixed 15,850 During August, Head Gear Inc. manufactured 21,200 designer hats and sold 22,900 hats Operating data for August are summarized as follows: Sales $187,780 Manufacturing costs: Direct materials $99,640 Direct labor 25,440 Variable manufacturing cost 12,720 Fixed manufacturing cost 12,300 150,100 Selling and administrativee expenses: Variable $9,160 6,690 Fixed 15,850 Required: 1a. Prepare an income statement for July using the absorption costing concept. Enter all amounts as positive numbers. Head Gear Inc. Absorption Costing Income Statement For the Month Ended July 31 Cost of goods sold: 1b. Prepare an income statement for August using the absorption costing concept. Enter all amounts as positive numbers Head Gear Inc. Absorption Costing Income Statement For the Month Ended August 31 Cost of goods sold: 2a. Prepare an income statement for July using the variable costing concept. Enter all amounts as positive numbers. Head Gear Inc. Variable Costing Income Statement For the Month Ended July 31 Variable cost of goods sold: Fixed costs: 2b. Prepare an income statement for August using the variable costing concept. Enter all amounts as positive numbers. Head Gear Inc. Variable Costing Income Statement For the Month Ended August 31 Variable cost of goods sold: Fixed costs: 3a. For July, income from operations reported under costing is less than costing due to part of manufacturing costs that are expensed. 3b. when large changes in inventory levels occur from one period to the next, it is possible for management to misinterpret such increases (or decreases) in income from operations as due to changes in: a. costs. b. prices. c. sales volume. d. "sales volume", "prices" and "costs" are correct. e. None of these choices is correct. The correct answer is: 4. Based on your answers to (1) and (2), did Head Gear Inc. operate more profitably in July or in August? Explain. Head Gear Inc. was under the variable costing concept. The difference in income reported under the absorption costing concept is due to allocating to the