Obj. 1,2 PR 20-3A Absorption and variable costing income statements for two months and analysis 1. Income from During the first month of operations ended July 31, Western Creations Company produced operations. 5847.000 80.000 designer cowboy hats, of which 72,000 were sold. Operating data for the month are summarized as follows: $4,320,000 SHOW VI Sales Manufacturing costs: Direct materials ..... Direct labor Variable manufacturing cost ..... Fixed manufacturing cost .......... Selling and administrative expenses: Variable ...... Fixed $1,600,000 1,440,000 240,000 320,000 3,600,000 $ 144,000 25,000 169,000 During August, Western Creations produced 64,000 designer cowboy hats and sold 72,000 cowboy hats. Operating data for August are summarized as follows: $4,320,000 Sales ... . Manufacturing costs: Direct materials ... Direct labor ......... Variable manufacturing cost ..., Fixed manufacturing cost ... Selling and administrative expenses: Variable ...... Fixed ..... $1,280,000 1.152,000 192,000 320,000 2.944,000 $ 144,000 25.000 169,000 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 opera tions in (1) and (2) for July. B. Explain the reason for the differences in the amount of income from opera tions in (1) and (2) for August. Based on your answers to (1) and (2), did Western Creations Company operate more profitably in July or in August? Explain. leis Obj. 4