Question: Absorption and variable costing income statements for two months in analysis Absorption and Variable Costing Income Statements for Two Months and Analysis During the first

Absorption and variable costing income statements for two months in analysis

and Variable Costing Income Statements for Two Months and Analysis During the

first month of operations ended July 31, Head Gear inc. manufactured 27,300

hats, of which 25,400 were sold. Operating data for the month are

summarized as follows: 1a. Prepare income statement for July using the absorption

Absorption and Variable Costing Income Statements for Two Months and Analysis During the first month of operations ended July 31, Head Gear inc. manufactured 27,300 hats, of which 25,400 were sold. Operating data for the month are summarized as follows: 1a. Prepare income statement for July using the absorption costing concept. Head Gear Inc. Absorption Costing Income Statement 1b. Prepare income statement for August using the absorption costing concept. Head Gear Inc. 2a. Prepare income statement for July using the variable costing concept. Head Gear Inc. 2b. Prepare income statement for August using the variable costing concept. Head Gear Inc. Variable Costing Income Statement 3a. For July, operating income 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 decreases) in operating income 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 operating income reported under the absorption costing concept is due to allocating to the

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