During the first month of operations ended May 31, 2013, T-Shirt Express Company pro- duced 37,000…

During the first month of operations ended May 31, 2013, T-Shirt Express Company pro-
duced 37,000 designer T-Shirts, of which 34,300 were sold. Operating data for the month
are summarized as follows:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $343,000
Manufacturing costs:
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $210,900
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,350
Variable manufacturing cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,640
Fixed manufacturing cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,420 319,310
Selling and administrative expenses:
Variable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,464
Fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,005 28,469
During June, T-Shirt Express Company produced 31,600 designer T-shirts and sold
34,300 T-shirts. Operating data for June are summarized as follows:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $343,000
Manufacturing costs:
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $180,120
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,980
Variable manufacturing cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,752
Fixed manufacturing cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,420 276,272
Selling and administrative expenses:
Variable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,464
Fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,005 28,469
Instructions
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.
3. a. Explain the reason for the differences in the amount of income from
operations in (1) and (2) for May.
b. Explain the reason for the differences in the amount of income from
operations in (1) and (2) for June.
4. Based on your answers to (1) and (2), did T-Shirt Express Company operate more
profitably in May or in June? Explain.