Income Statements under Absorption and Variable Costing Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August: Sales (8,000 units) Production costs (10,000 units) $800,000 Direct materials Direct labor Variable factory overhead Fixed factory overhead $370,000 178,000 89,000 59,000 696,000 Selling and administrative expenses Variable selling and administrative expenses $107,900 Fixed selling and administrative expenses 41,800 149,700 If required, round interim per-unit calculations to the nearest cent. a. Prepare an income statement according to the absorption costing concept Shawnee Motors Inc. Absorption Costing Income Statement For the Month Ended August 31 Sales Cost of goods sold Gross profit Selling and administrative Income from operations 800,000 556,800 104,000 149,700 556,800 b. Prepare an income statement according to the variable costing concept. Shawnee Motors Inc. Variable Costing Income Statement For the Month Ended 31 Fixed costs: Feedback Check My Work b. Under variable costing, the cost of goods manufaclured includes only variable manufacturing costs Learning Objective 1 c. what is the reason for the difference in the amount of income from operations reported in (a) and (b)i? Under the regardless ofthe amount of inventory change. Thus, when inventory increases, 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, income statement will have a higher income from operations than will the variable costing income statement. Check My Work Incorrect