The following data were adapted from a recent income statement of Ansara Company for the year ended December 31:

(in millions)
Sales	$16,610
Cost of goods sold	$(14,120)
Selling, administrative, and other expenses	(1,490)
Total expenses	$(15,610)
Operating income	$1,000

Assume that $3,620 million of cost of goods sold and $820 million of selling, administrative, and other expenses were fixed costs. Inventories at the beginning and end of the year were as follows:

Beginning inventory	$1,970
Ending inventory	$2,300

Also, assume that 20% of the beginning and ending inventories were fixed costs.

a. Prepare an income statement according to the variable costing concept for Ansara Company. Round numbers to nearest million.

Ansara Company
Variable Costing Income Statement (assumed)
For the Year Ended December 31
		$fill in the blank 7fdb09fc501c02e_2
Variable cost of goods sold:
Beginning inventory	$fill in the blank 7fdb09fc501c02e_3
	fill in the blank 7fdb09fc501c02e_5
	fill in the blank 7fdb09fc501c02e_7
		fill in the blank 7fdb09fc501c02e_9
		$fill in the blank 7fdb09fc501c02e_11
		fill in the blank 7fdb09fc501c02e_13
		$fill in the blank 7fdb09fc501c02e_15
Fixed costs:
	$fill in the blank 7fdb09fc501c02e_17
	fill in the blank 7fdb09fc501c02e_19
		fill in the blank 7fdb09fc501c02e_21
		$fill in the blank 7fdb09fc501c02e_23

b. Explain the difference between the amount of operating income reported under the absorption costing and variable costing concepts.

The income from operations under the variable costing concept be the same as the income from operations under the absorption costing concept when the inventories either increase or decrease during the year. In this case, Ansaras inventory , meaning it sold than it produced. As a result, the income from operations under the variable costing concept will be than the income from operations under the absorption costing concept. The reason is because the variable costing concept deduct the fixed costs in the period that they are incurred, regardless of changes in inventory balances.