During the first month of operations ended May 31, Big Sky Creations Company produced 55,000 designer cowboy boots, of which 51,150 were sold. Operating data for the month are summarized as follows: 1 Sales $895,125.00 2 Manufacturing costs: 3 Direct materials $401,500.00 4 Direct labor 137,500.00 5 Variable manufacturing cost 60,500.00 6 Fixed manufacturing cost 55,000.00 654,500.00 7 Selling and administrative expenses: 8 Variable $40,920.00 9 Fixed 25,575.00 66,495.00 During June, Big Sky Creations produced 47,300 designer cowboy boots and sold 51,150 cowboy boots. Operating data for June are summarized as follows: 1 Sales $895,125.00 2 Manufacturing costs: 3 Direct materials $345,290.00 4 Direct labor 118,250.00 5 Variable manufacturing cost 52,030.00 6 Fixed manufacturing cost 55,000.00 570,570.00 7 Selling and administrative expenses: 8 Variable $40,920.00 9 Fixed 25,575.00 66,495.00
During the first month of operations ended May 31, Big Sky Creations Company produced 55,000 designer cowboy boots, of which 51,150 were sold. Operating data for the month are summarized as follows: 1 Sales $895,125.00 2 Manufacturing costs: 3 Direct materials $401,500.00 4 Direct labor 137,500.00 5 Variable manufacturing cost 60,500.00 6 Fixed manufacturing cost 55,000.00 654,500.00 7 Selling and administrative expenses: 8 Variable $40,920.00 9 Fixed 25,575.00 66,495.00 During June, Big Sky Creations produced 47,300 designer cowboy boots and sold 51,150 cowboy boots. Operating data for June are summarized as follows: 1 Sales $895,125.00 2 Manufacturing costs: 3 Direct materials $345,290.00 4 Direct labor 118,250.00 5 Variable manufacturing cost 52,030.00 6 Fixed manufacturing cost 55,000.00 570,570.00 7 Selling and administrative expenses: 8 Variable $40,920.00 9 Fixed 25,575.00 66,495.00
Cornerstones of Cost Management (Cornerstones Series)
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ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
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Chapter2: Basic Cost Management Concepts
Section: Chapter Questions
Problem 22E: Ellerson Company provided the following information for the last calendar year: During the year,...
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During the first month of operations ended May 31, Big Sky Creations Company produced 55,000 designer cowboy boots, of which 51,150 were sold. Operating data for the month are summarized as follows:
1
|
Sales
|
|
$895,125.00
|
2
|
|
|
|
3
|
Direct materials
|
$401,500.00
|
|
4
|
Direct labor
|
137,500.00
|
|
5
|
Variable manufacturing cost
|
60,500.00
|
|
6
|
Fixed manufacturing cost
|
55,000.00
|
654,500.00
|
7
|
Selling and administrative expenses:
|
|
|
8
|
Variable
|
$40,920.00
|
|
9
|
Fixed
|
25,575.00
|
66,495.00
|
During June, Big Sky Creations produced 47,300 designer cowboy boots and sold 51,150 cowboy boots. Operating data for June are summarized as follows:
1
|
Sales
|
|
$895,125.00
|
2
|
Manufacturing costs:
|
|
|
3
|
Direct materials
|
$345,290.00
|
|
4
|
Direct labor
|
118,250.00
|
|
5
|
Variable manufacturing cost
|
52,030.00
|
|
6
|
Fixed manufacturing cost
|
55,000.00
|
570,570.00
|
7
|
Selling and administrative expenses:
|
|
|
8
|
Variable
|
$40,920.00
|
|
9
|
Fixed
|
25,575.00
|
66,495.00
|
Required: | |
1. | Using the absorption costing concept, prepare income statements for (a) May and (b) June. |
2. | Using the variable costing concept, prepare income statements for (a) May and (b) June. |
3a. | Explain the reason for the differences in operating income in (1) and (2) for May. |
3b. | Explain the reason for the differences in operating income in (1) and (2) for June. |
4. | Based on your answers to (1) and (2), did Big Sky Creations Company operate more profitably in May or in June? Explain. |
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