During the first month of operations ended May 31, Big Sky Creations Company produced 56,250 designer cowboy boots, of which 52,950 were sold. Operating data for the month are summarized as follows: 1 Sales $794,250.00 2 Manufacturing costs: 3 Direct materials $416,250.00 4 Direct labor 135,000.00 5 Variable manufacturing cost 61,875.00 6 Fixed manufacturing cost 56,250.00 669,375.00 7 Selling and administrative expenses: 8 Variable $31,770.00 9 Fixed 26,475.00 58,245.00 During June, Big Sky Creations produced 49,650 designer cowboy boots and sold 52,950 cowboy boots. Operating data for June are summarized as follows: 1 Sales $794,250.00 2 Manufacturing costs: 3 Direct materials $367,410.00 4 Direct labor 119,160.00 5 Variable manufacturing cost 54,615.00 6 Fixed manufacturing cost 56,250.00 597,435.00 7 Selling and administrative expenses: 8 Variable $31,770.00 9 Fixed 26,475.00 58,245.00 Using the absorption costing concept, prepare income statements for May and June.* Using the variable costing concept, prepare income statements for May and June.* Explain the reason for the differences in operating income in 1 and 2 for May. Explain the reason for the differences in operating income in 1 and 2 for June. Based on your answers to 1 and 2, did Big Sky Creations Company operate more profitably in May or in June? Explain.
During the first month of operations ended May 31, Big Sky Creations Company produced 56,250 designer cowboy boots, of which 52,950 were sold. Operating data for the month are summarized as follows:
|
1 |
Sales |
|
$794,250.00 |
|
2 |
|
|
|
|
3 |
Direct materials |
$416,250.00 |
|
|
4 |
Direct labor |
135,000.00 |
|
|
5 |
Variable manufacturing cost |
61,875.00 |
|
|
6 |
Fixed manufacturing cost |
56,250.00 |
669,375.00 |
|
7 |
Selling and administrative expenses: |
|
|
|
8 |
Variable |
$31,770.00 |
|
|
9 |
Fixed |
26,475.00 |
58,245.00 |
During June, Big Sky Creations produced 49,650 designer cowboy boots and sold 52,950 cowboy boots. Operating data for June are summarized as follows:
|
1 |
Sales |
|
$794,250.00 |
|
2 |
Manufacturing costs: |
|
|
|
3 |
Direct materials |
$367,410.00 |
|
|
4 |
Direct labor |
119,160.00 |
|
|
5 |
Variable manufacturing cost |
54,615.00 |
|
|
6 |
Fixed manufacturing cost |
56,250.00 |
597,435.00 |
|
7 |
Selling and administrative expenses: |
|
|
|
8 |
Variable |
$31,770.00 |
|
|
9 |
Fixed |
26,475.00 |
58,245.00 |
|
Using the absorption costing concept, prepare income statements for May and June.* |
|||
|
Using the variable costing concept, prepare income statements for May and June.* |
|||
|
Explain the reason for the differences in operating income in 1 and 2 for May. |
|||
|
Explain the reason for the differences in operating income in 1 and 2 for June. |
|||
|
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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