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 (67,100 units) during the first month, creating an ending inventory of 6,100 units. During February, the company produced 61,000 units during the month but sold 67,100 units at $85 per unit. The February manufacturing costs and selling and administrative expenses were as follows: Total Number of Units Unit Cost Cost Manufacturing costs in February 1 beginning inventory: Variable 6,100 $34.00 $207,400 Fixed 6,100 13.00 79,300 Total $47.00 $286,700 Manufacturing costs in February: Variable 61,000 $34.00 $2,074,000 Fixed 61,000 14.30 872,300 Total $48.30 $2,946,300 Selling and administrative expenses in February: Variable 67,100 $16.90 $1,133,990 Fixed 67,100 7.00 469,700 Total $23.90 $1,603,690 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 $ $ Fixed costs: $ 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 deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory decreases, the income. all of the fixed manufacturing cost is income statement will have a lower operating