Absorption and Variable Costing Income Statements for Two Months and AnalysisDuring the first month of operations ended July 31, Head Gear Inc. manufactured 33,900 hats, of which 32,200 vwere sold. Operating data for the month are summarized as follows:Sales$296,240Manufacturing costs:Direct materials$176,280Direct labor47,460Variable manufacturing cost20,340Fixed manufacturing cost20,340264/420Selling and administrative expenses:Variable$16,100Fixed11,75027,850During August Head Gear Inc, manufectured 30,500 hats and sold 32,200 hats. Operating data for August are summarized as folovsiSales$296,240Manufacturing costs:Direct materials$158,600Direct labor42.700Variable manufacturing cost18,30020,340239,940Fixed manufacturing costSelling and administrative expenses:$16.100Variable11.75027 850FixedRequired: 2a. Prepare income statement for July using the variable costing concept.Head Gear Inc.Variable Costing Income StatementFor the Month Ended July 31Sales$ 296,240Variable cost of goods sold:Variable cost of goods manufacturedS244,080 VInventory, July 3111,900Total variable cost of goods soldManufacturing marginVariable selling and administrative expensesContribution marginFixed costs:Fixed maniifacturing costs,20.340Fixed selling and administrative expenses11.75032,090Total fixed costsOperating incomeFeedtack

Name: Absorption and Variable Costing Income Statements for Two Months and
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Description: Absorption and Variable Costing Income Statements for Two Months and AnalysisDuring the first month of operations ended July 31, Head Gear Inc. manufactured 33,900 hats, of which 32,200 vwere sold. Operating data for the month are summarized as foll

Variable costing means that inventory is valued at variable manufacturing cost and fixed cost is ignored. Absorption costing means that inventory is valued at total manufacturing cost including fixed manufacturing cost. Variable cost is the cost which vary with the level of output where as fixed cost remain fixed what ever may be the level of output.

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2a. Prepare income statement for July using the variable costing concept. Head Gear Inc. Variable Costing Income Statement For the Month Ended July 31 Sales 296,240 V Variable cost of goods sold: Variable cost of goods manufactured 244,080 Inventory, July 31 11,900 X Total variable cost of goods sold Manufacturing margin Variable selling and administrative expenses Contribution margin Fixed costs: Fixed manufacturing costs 20,340 Fixed selling and administrative expenses 11,750 Total fixed costs 32,090 Operating income Fendack

2a. Prepare income statement for July using the variable costing concept. Head Gear Inc. Variable Costing Income Statement For the Month Ended July 31 Sales 296,240 V Variable cost of goods sold: Variable cost of goods manufactured 244,080 Inventory, July 31 11,900 X Total variable cost of goods sold Manufacturing margin Variable selling and administrative expenses Contribution margin Fixed costs: Fixed manufacturing costs 20,340 Fixed selling and administrative expenses 11,750 Total fixed costs 32,090 Operating income Fendack

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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