Frigid Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1, 2016, and operated at 100% of capacity during the first month. The following data summarize the results for July: 1 Sales (35,000 units) $8,750,000.00 2 Production costs (42,500 units): 3 Direct materials $4,250,000.00 4 Direct labor 2,125,000.00 5 Variable factory overhead 1,062,500.00 6 Fixed factory overhead 637,500.00 8,075,000.00 7 Selling and administrative expenses: 8 Variable selling and administrative expenses $1,150,000.00 9 Fixed selling and administrative expenses 200,000.00 1,350,000.00 Required: A. Prepare an income statement according to the absorption costing concept.* B. Prepare an income statement according to the variable costing concept. A colon (:) will automatically appear if it is required.* C. What is the reason for the difference in the amount of income from operations reported in (A) and (B)? * Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. Enter all amounts as positive numbers. Labels and Amount Descriptions Labels Fixed costs For the Month Ended July 31, 2016 July 31, 2016 Amount Descriptions Contribution margin Contribution margin ratio Cost of goods sold Fixed factory overhead costs Fixed selling and administrative expenses Gross profit Income from operations Loss from operations Manufacturing margin Planned contribution margin Sales Sales mix Selling and administrative expenses Variable cost of goods sold Variable selling and administrative expenses Absorption Costing Income Statement A. Prepare an income statement according to the absorption costing concept. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Enter all amounts as positive numbers. Frigid Motors Inc. Absorption Costing Income Statement (Label) 1 2 3 4 5 Variable Costing Income Statement B. Prepare an income statement according to the variable costing concept. A colon (:) will automatically appear if it is required. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. Enter all amounts as positive numbers. Frigid Motors Inc. Variable Costing Income Statement (Label) 1 2 3 4 5 6 (Label) 7 8 9 Final Question What is the reason for the difference in the amount of income from operations reported in (A) and (B)? Check all that apply. Under absorption costing, when inventory increases, the income statement will have a higher income from operations than will the variable costing income statement. Under variable costing, the units that were produced but unsold include fixed factory overhead cost, which is not included in cost of goods sold. There is no difference; the income from operations reported in (A) and (B) is the same. Under absorption costing, when inventory increases, the income statement will have a lower income from operations than will the variable costing income statement. Under variable costing, all of the fixed factory overhead cost is deducted in the period in which it is incurred, regardless of the amount of inventory change.