During the first month of operations ended July 31, Head Gear Inc. manufactured

Question

During the first month of operations ended July 31, Head Gear Inc. manufactured 30,700 hats, of which 28,600 were sold. Operating data for the month are summarized as follows:

During August, Head Gear Inc. manufactured 26,500 designer hats and sold 28,600 hats. Operating data for August are summarized as follows:

Required:

1a. Prepare an income statement for July using the absorption costing concept. Enter all amounts as positive numbers.

Feedback

1a. a. and b. Sales - (cost of goods manufactured - ending inventory*) = Gross profit; gross profit - selling and administrative expenses = income from operations.
* (Manufactured Units - Sold units) x (total manufacturing costs/manufactured units)
Sales - variable cost of goods sold* = Manufacturing margin; Manufacturing margin - variable selling and administrative expenses = Contribution margin; Contribution margin - (fixed manufacturing costs + fixed selling and administrative expenses) = income from operations.
*Variable cost of goods sold = Variable cost of goods manufactured - [(Manufactured Units - Sold units) x (variable manufacturing costs/manufactured units)]

Learning Objective 1 and Learning Objective 2.

1b. Prepare an income statement for August using the absorption costing concept. Enter all amounts as positive numbers.

Feedback

Learning Objective 1 and Learning Objective 2.

2a. Prepare an income statement for July using the variable costing concept. Enter all amounts as positive numbers.

Feedback

2a. a. and b. Sales - (cost of goods manufactured - ending inventory*) = Gross profit; gross profit - selling and administrative expenses = income from operations.
* (Manufactured Units - Sold units) x (total manufacturing costs/manufactured units)
Sales - variable cost of goods sold* = Manufacturing margin; Manufacturing margin - variable selling and administrative expenses = Contribution margin; Contribution margin - (fixed manufacturing costs + fixed selling and administrative expenses) = income from operations.
*Variable cost of goods sold = Variable cost of goods manufactured - [(Manufactured Units - Sold units) x (variable manufacturing costs/manufactured units)]

Learning Objective 1 and Learning Objective 2.

2b. Prepare an income statement for August using the variable costing concept. Enter all amounts as positive numbers.

Sales $263,120 Manufacturing costs: Direct materials $159,640 Direct labor 42,980 Variable manufacturing cost 18,420 Fixed manufacturing cost 18,420 239,460 Selling and administrative expenses: Variable $14,300 Fixed 10,440 24,740

Explanation / Answer

1 a. Head Gear Inc.

Absorption Costing Income Statement

For the month ended July 31

1 b. Head Gear Inc

Absorption Costing Income Statement

For the month ended August 31

2. a. Head Gear Inc.

Variable Costing Income Statement

For the month ended July 31

2. b. Head Gear Inc.

Variable Costing Income Statement

For the month ended August 31

$ $ Sales 263,120 Less: Cost of Goods Sold Beginning Inventory 0 Cost of Goods Manufactured 239,460 Cost of Goods Available for Sale 239,460 Less: Ending Inventory (16,380) 223,080 Gross Profit 40,040 Selling and Administrative Expenses Variable 14,300 Fixed 10,440 Total Selling and Administrative Expenses 24,740 Income from Operations 15,300

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.