Gallatin County Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1 and operated at 100% of capacity during the first month. The following data summarize the results for July: Sales (15,500 units) Production costs (20,000 units): Direct materials Direct labor Variable factory overhead Fixed factory overhead $814,000 $1,705,000 390,000 196,000 130,000 1,530,000 Selling and administrative expenses: Variable selling and administrative expenses $237,200 Fixed selling and administrative expenses 91,800 329,000 If required, round interim per-unit calculations to the nearest cent. required, round interim per-unit calculations to the nearest cent. a. Prepare an income statement according to the absorption costing concept. Gallatin County Motors Inc. Absorption Costing Income Statement For the Month Ended July 31 Sales Cost of goods sold Gross profit Selling and administrative expenses Operating income 1,705,000 b. Prepare an income statement according to the variable costing concept. Gallatin County Motors Inc. Variable Costing Income Statement For the Month Ended July 31 Fixed costs: c. What is the reason for the difference in the amount of operating income reported in (a) and (b)? Under the method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under , all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory income statement will have a higher operating income. change. Thus, when inventory increases, the