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: $9,500,000.00 1 Sales (38,000 units) 2 Production costs (46,500 units): Direct materials 3 $4,650,000.00 4 1,860,000.00 1,162,500.00 5 697,500.00 8,370,000.00 Direct labor Variable factory overhead 6 Fixed factory overhead 7 Selling and administrative expenses: Variable selling and administrative expenses 9 Fixed selling and administrative expenses 8 $1,250,000.00 235,000.00 1,485,000.00 Gallatin County Motors Inc. Absorption Costing Income Statement For the Month Ended July 31 1 Sales $9,500,000.00 6,840,000.00 2 Cost of goods sold 3 Gross profit - Selling and administrative expenses $2,660,000.00 1,485,000.00 5 Operating income $1,175,000.00 Gallatin County Motors Inc. Variable Costing Income Statement For the Month Ended July 31 1 Sales 2 Variable cost of goods sold 3 Manufacturing margin - Variable selling and administrative expenses 5 Contribution margin 1,250,000.00 $1,980,000.00 7 $697,500.00 6 Fixed costs: Fixed factory overhead costs 8 Fixed selling and administrative expenses Total fixed costs 10 Operating income 9 932,500.00 c. What is the reason for the difference in the amount of Operating income reported in (a) and (b)? Check all that apply. Under absorption costing, when inventory increases, the income statement will have a lower Operating income than will the variable costing income statement. Under absorption costing, when inventory increases, the income statement will have a higher Operating income 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. 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 Operating income reported in (a) and (b) is the same