Income Statements under Absorption Costing and Variable Costing Crazy Mountain Sports Inc. assembles and sells snowmobile engines. The company began operations on March 1 and operated at 100% of capacity during the first month. The following data summarize the results for March: Sales (16,000 units) Production costs (21,000 units): Direct materials Direct labor Variable factory overhead $699,300 $1,440,000 336,000 168,000 111,300 1,314,600 Fixed factory overhead Selling and administrative expenses: Variable selling and administrative expenses $203,800 Fixed selling and administrative expenses 78,900 282,700 If required, round interim per-unit calculations to the nearest cent. a. Prepare an income statement according to the absorption costing concept. Crazy Mountain Sports Inc. Absorption Costing Income Statement For the Month Ended March 31 Line Item Description Sales Cost of goods sold Gross profit Selling and administrative expenses Operating income Amount b. Prepare an income statement according to the variable costing concept. Crazy Mountain Sports Inc. Variable Costing Income Statement For the Month Ended March 31 Line Item Description Sales Variable cost of goods sold Manufacturing margin Variable selling and administrative expenses Contribution margin Fixed costs: Fixed factory overhead costs Fixed selling and administrative expenses Total fixed costs Operating income Amount Amount 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 fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory increases, the income statement will have a higher operating income. All work saved. all of the Previous Save and Exit Submit Assignment for Grading