Nicky's Entrees produces frozen meals, which it sells for $8 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.) Requirement 1. Compute the product cost per meal produced under absorption costing and under variable costing. Do this first for January and then for February. January February Absorption Variable Absorption Variable costing costing costing costing Total product cost Requirement 2a. Prepare separate monthly income statements for January and for February, using absorption costing. Nicky's Entrees Income Statement (Absorption Costing) Less: Less: Month Ended January 31 February 28 Requirement 2b. Prepare Nicky's Entrees' January and February income statements using variable costing. Nicky's Entrees Contribution Margin Income Statement (Variable Costing) Less: Less: Month Ended January 31 February 28 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 units sold. Absorption costing defers some of not be variable costing income. This is because units produced were until those units are sold. Deferring these January's absorption costing income. In February, absorption costing operating income units sold for the month. costs in the units of ending inventory. These costs will costs to the future variable costing operating income. This is because units produced were As inventory assigned to that inventory are expensed in , as was the case in this February, January's This costs that absorption costing February's absorption costing income. Data table it co Xductic January February Sales .1,300 meals 1,700 meals Production... 2,000 meals 1,400 meals Sales commission expense per meal.. Variable manufacturing expense per meal. Total fixed manufacturing overhead $3 $3 $1 $1 $700 $700 Total fixed marketing and administrative expenses.. $500 $500 pat