Louie's Meals produces frozen meals, which it sells for $10 each. The company uses the FIFO inventory costing method, and it computes a new monthly fixed manufacturing overhead rate based on the actual number of meals produced that month. All costs and production levels are exactly as planned. The following data are from the company's first two months in business (Click the icon to view the data) Read the requirements Less Operating income 5060 5640 Requirement 2b. Prepare Louie's Meals' January and February income statements using variable costing Data table Louie's Meals January February Contribution Margin Income Statement (Variable Costing) Sales 1,600 meals Month Ended Production 2,000 meals 1,800 meals 1,600 meals January 31 February 28 Variable manufacturing expense per meal $4 $4 Sales revenue Less Vanable expenses Sales revenue 16000 18000 Sales commission expense per meal $2 $2 Total fixed manufacturing overhead $800 $800 Total fixed marketing and administrative expenses.. $700 $700 Variable expenses Contribution margin Less Fixed expenses Fixed manufacturing overhead Fixed operating expenses Operating income 4900 5700 Print Done Requirement 3. Is operating income higher under absorption costing or variable costing in January? In February? Explain the pattern of differences in operating income based on absorption costing versus variable costing In January, absorption costing operating income vanable costing income. This is because units produced were Yuts sold. Absorption costing defers some of costs in the units of ending inventory. These costs will not be until those units are sold. Deferring these January's absorption costing income costs to the future. In February, absorption costing operating income variable costing operating income. This is because units produced were units sold for the month. As inventory , as was the case in this February, January's costs that absorption costing assigned to that inventory are expensed in This February's absorption costing income.