Income Statements under Absorption Costing and Variable Costing Gallatin County Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1 and operated at 100% of capacity during the first month. The following data summarize the results for July: Sales (11,000 units) $1,650,000 Production costs (14,000 units): Direct materials $777,000 Direct labor 372,400 Variable factory overhead 186,200 Fixed factory overhead 124,600 1,460,200 Selling and administrative expenses: Variable selling and administrative expenses $226,300 Fixed selling and administrative expenses 87,600 313,900 If required, round interim per-unit calculations to the nearest cent. a. Prepare an income statement according to the absorption costing concept. Gallatin County Motors Inc. Absorption Costing Income Statement For the Month Ended July 31 $fill in the blank 9c1dfe01504ff94_2 fill in the blank 9c1dfe01504ff94_4 $fill in the blank 9c1dfe01504ff94_6 fill in the blank 9c1dfe01504ff94_8 $fill in the blank 9c1dfe01504ff94_10 b. Prepare an income statement according to the variable costing concept. Gallatin County Motors Inc. Variable Costing Income Statement For the Month Ended July 31 $fill in the blank 02c311f79ff5ffc_2 fill in the blank 02c311f79ff5ffc_4 $fill in the blank 02c311f79ff5ffc_6 fill in the blank 02c311f79ff5ffc_8 $fill in the blank 02c311f79ff5ffc_10 Fixed costs: $fill in the blank 02c311f79ff5ffc_12 fill in the blank 02c311f79ff5ffc_14 fill in the blank 02c311f79ff5ffc_16 $fill in the blank 02c311f79ff5ffc_18 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 increases, the income statement will have a higher operating income.