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Income Statements under Absorption and Variable Costing Patagucci Inc. manufactures and sells athletic equipment. The company began operations on August 1, 2016, and operated at 100% of capacity 72,600 units during the first month, creating an ending inventory of 6,600 units. During September, the company produced 66,000 garments but sold 72,600 units at $100 per unit. The September manufacturing costs and selling and administrative expenses were as follows: Number of Unit Cost Total Units Cost Manufacturing costs in September beginning inventory: Variable 6,600 $40.00 $264,000 Fixed 6,600 15.00 99,000 Total 55.00 $363,000 September manufacturing costs: Variable 66,000 $40.00 $2,640,000 16.50 1,089,000 $56.50 $3,729,000 Fixed 66,000 Total Selling and administrative expenses Variable 1,415,700 573,500 $1,989,200 Fixed Total a. Prepare an income statement according to the absorption costing concept for September. Patagucci Inc. Absorption Costing Income Statement For the Month Ended September 30, 2016 Cost of goods sold: b. Prepare an income statement according to the variable costing concept for September. Patagucci Inc. Variable Costing Income Statement For the Month Ended September 30, 2016 Foxed costs: c. What is the reason for the difference in the amount of income from operations reported in (a) and (b)? Under the incurred, regardless of the amount of inventory change. Thus, when inventory decreases, 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 income statement will have a lower income from operations