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 (11,500 units) Production costs (15,000 units): $1,610,000 Direct materials $777,000 Direct labor Variable factory overhead Fixed factory overhead 373,500 186,000 124,500 1,461,000 Selling and administrative expenses: Variable selling and administrative expenses $226,500 Fixed selling and administrative expenses 87,700 314,200 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 profita Selling and administrative expenses Amount 1410,000 1461,000 X 149,000 X 314,200 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 Amount Sales 1,610,000 V Cost of goods sold 1,461,000 X Gross profit 149,000 X Selling and administrative expenses 314,200 Operating income -165,200 X Feedback Check My Work a. Under absorption costing, the cost of goods manufactured Includes direct materials, direct labor, and factory overhead costs. Both fixed costs are included as part of factory overhead. 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 Amount 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 Feedback Check My Work b. Under variable costing, the cost of goods manufactured includes only variable manufacturing costs. c. What is the reason for the difference in the amount of operating income reported in (a) and (b)? Under the absorption costing variable costing method, the fixed manufacturing cost included in the cost of goods sold is matched wit , all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the income statement will have a higher operating income. when inventory increases, the absorption costing