Income Statements under Absorption Costing and Variable Costing Fresno Industries Inc. manufactures and sells high-quality camping tents. The company began operations on January 1 and operated at 100% of capacity (52,800 units) during the first month, creating an ending inventory of 4,800 units. During February, the company produced 48,000 units during the month but sold 52,800 units at $75 per unit. The February manufacturing costs and selling and administrative expenses were as follows: Number of Unit Total Units Cost Cost Manufacturing costs in February 1 beginning inventory: Variable 4,800 $30.00 $144,000 Fixed 4,800 11.00 52,800 Total $41.00 $196,800 Manufacturing costs in February Variable 530.00 48,000 48,000 $1,440,000 580,800 12.10 Fixed $42.10 $2,020,800 Total Selling and administrative expenses in February: 5755,040 Variable 52,800 52,800 $14.30 7.00 Fixed 369,600 $21.30 $1,124,640 Total a. Prepare an income statement according to the absorption costing concept for the month ending February 28. Fresno Industries Inc. Absorption Costing Income Statement For the Month Ended February 28 a. Prepare an income statement according to the absorption costing concept for the month ending February 28, Fresno Industries Inc. Absorption Costing Income Statement For the Month Ended February 28 Cost of goods sold: b. Prepare an income statement according to the variable costing concept for the month ending February 28. Fresno Industries Inc. Variable Costing Income Statement For the Month Ended February 28 b. Prepare an income statement according to the variable costing concept for the month ending February 28. Fresno Industries Inc. Variable Costing Income Statement For the Month Ended February 28 Fixed costs: c. What is the reason for the difference in the amount of operating income reported in (a) and (b)? all of the fixed Under the method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory decreases, the income statement will have a lower operating income