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 (191,000 units) during the first month, creating an ending inventory of 20,000 units. During February, the company produced 171,000 units during the month but sold 191,000 units at $520 per unit. The February manufacturing costs and selling and administrative expenses were as follows

Income Statements under Absorption Costing and Variable Costing Open spreadsheet a. Prepare an income statement according to the absorption costing concept for the month ending February 28. a. Prepare an income statement according to the absorption costing concept for the month ending February 28. b. Predare an income statement accordina to the variable costina conceot for the month endina Februarv 28. 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 inventory change. Thus, when inventory decreases, the income statement will have a lower operating income. , all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of