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 (10,500 units) $1,155,000 Production costs (14,000 units): Direct materials $569,800 Direct labor 273,000 Variable factory overhead 137,200 Fixed factory overhead 91,000 1,071,000 Selling and administrative expenses: Variable seling and administrative expenses $166,000 Fixed selling and administrative expenses 64,300 230,300 11 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 a. Prepare an income statement according to the absorption costing concept. Shawnee Motors Inc Absorption Costing Income Statement For the Month Ended August 31 b. Prepare an income statement according to the variable costing concept Shawnee Motors Inc. Variable Costing Income Statement For the Month Ended August 31 Fxed costs b. Prepare an income statement according to the variable costing concept. Shawnee Motors Inc. Variable Costing Income Statement For the Month Ended August 31 Fxed costs cWhat 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 is matched with the revenues. Under all of the foced manufacturing cost is deducted in the perlod in which it is incurred, regardless of the amount of inventory change Thus, when inventory increases, the Income statement will have a higher income from operations than will the variable costing income statement