Variable costing income statement OBJ. 1 The following data were adapted from a recent income statement of Procter & Gamble Company:

(in millions)

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $84,167 Operating costs:

Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $42,428 Marketing, administrative, and other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,337 Total operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $72,765 Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,402 Assume that the variable amount of each category of operating costs is as follows:

(in millions)

Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23,760 Marketing, administrative, and other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,135

a. Based on the data given, prepare a variable costing income statement for Procter &

Gamble Company, assuming that the company maintained constant inventory levels during the period.

b. If Procter & Gamble reduced its inventories during the period, what impact would that have on the income from operations determined under absorption costing?