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Absorption and Variable Costing Income Statements for Two Months and Analysis During the first month of operations ended July 31. Head Gear Inc. manufactured 35,400 hats, of which 33,300 were sold, Operating data for the month are summarized as follows: During August, Head Gear Inc, manufactured 31,200 hats and sAdd 33,300 hats. Operating data for August are summarized as follows: Required: 1a. Prepare income statement for July using the absorption costing concept. 1b. Prepare income statement for August using the absorption costing concept. 2a. Prepare income statement for July using the variable costing concept. Head Gear Inc. Variable Costing Income Statement 2b. Prepare income statement for August using the variable costing concept. Head Gear Inc. 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 (or decreases) in operating income as due to changes in: a. costs. b. prices. c. sates volume. d. "sales volume", "prices" and "costs" are correct. e. None of these cholces 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