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 (18,500 units) $1,850,000 Production costs (24,000 units): Direct materials $888,000 Direct labor 427,200 Variable factory overhead 213,600 Fixed factory overhead 141,600 1,670,400 Selling and administrative expenses: Variable selling and administrative expenses $258,900 Fixed selling and administrative expenses 100,200 359,100 Show Me How Print Item a. Prepare an income statement according to the absorption costing concept. Shawnee Motors Inc. Absorption Costing Income Statement For the Month Ended August 31 Cost of goods sold Direct labor Direct materials Fixed factory overhead $ Sales b. Prepare an income statement according to the variable costin Shawnee Motors Inc. Variable Costing Income Statement For the Month Ended August 31 Contribution margin Fixed selling and administrative expenses 100 Manufacturing margin Sales Variable selling and administrative expenses c. What is the reason for the difference in the amount of income from operations reported in (a) and (b) Under the method, the fixed manufacturing cost included in the cost of goods sold matched here Under all of the foxed manufacturing cost is deducted in the period in which it is incredere of inventory change. Thus, when inventory Increases, the income statement will have a higher operations than will the variable costing income statement. c. What is the reason for the difference in the amount of income from operations reported in (a) and (b) Under the Under of inventboorption costing operations variable costing method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount inventory increases, the Income statement will have a higher income from costing income statement