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Category > Accounting Posted 07 May 2017 My Price 8.00

Absorption and variable costing income statements for two months and analysis

 

Absorption and variable costing income statements for two months and analysis

During the first month of operations ended July 31, 2016, Head Gear Inc. manufactured 6,400 hats, of which 5,200 were sold. Operating data for the month are summarized as follows:

Sales   ................................................................

 

$104,000

Manufacturing costs:

 

 

Direct materials ....................................................

$47,360

 

Direct labor   .......................................................

22,400

 

Variable manufacturing cost  .......................................

12,160

 

Fixed manufacturing cost  ..........................................

  15,360

97,280

Selling and administrative expenses:

 

 

Variable  ...........................................................

$10,920

 

Fixed  ..............................................................

     5,200

16,120

 
 
 During August Head Gear Inc. manufactured 4,000 hats and sold 5,200 hats. Operat- ing data for August are summarized as   follows:

Sales  ...............................................................

 

$104,000

Manufacturing costs:

 

 

Direct   materials   ...................................................

$29,600

 

Direct labor  ......................................................

14,000

 

Variable manufacturing cost   ......................................

7,600

 

Fixed manufacturing cost .........................................

  15,360

66,560

Selling and administrative expenses:

 

 

Variable    ..........................................................

$10,920

 

Fixed .............................................................

     5,200

16,120
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.

 

 
 

Answers

Alpha Geek
(8)
Status NEW Posted 07 May 2017 04:05 PM My Price 8.00

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file 1494174729-Answer.docx preview (425 words )
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