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 (166,000 units) during the first month, creating an ending inventory of 18,000 units. During February, the company produced 148,000 units during the month but sold 166,000 units at $530 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 18,000 $265.00 $4,770,000 468,000 Fixed 18,000 26.00 Total $291.00 $5,238,000 Manufacturing costs in February Variable 148,000 $265.00 $39,220,000 Fixed 148,000 30.00 4,440,000 Total $295.00 $43,660,000 Selling and administrative expenses in February: Variable 166,000 20.00 $3,320,000 Fixed 166,000 5.00 830,000 Total 25.00 $4,150,000 a. Prepare an income statement according to the absorption costing concept for February. Enter all amounts as positive numbers. 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 February. Enter all amounts as positive numbers. Fresno Industries Inc. Variable Costing Income Statement For the Month Ended February 28 U 1.000 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 , all of the fixed 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