The manager of the manufacturing division of Iowa Windows does not understand why income went down when sales went up. Some of the information he has selected for evaluation include:

	January	February
Units produced	40,000	30,000
Units sold	30,000	40,000
Sales	$600,000	$800,000
Beginning inventory	0	150,000
Cost of production	600,000	550,000
Ending inventory	150,000	0
Operating income	70,000	35,000

The division operated at normal capacity during January. Variable manufacturing cost per unit was $5, and the fixed costs were $400,000. Selling and administrative expenses were all fixed.

Required:

Explain the profit differences. How would variable costing income statements help the manager understand the division's operating income?

Please show calculations!

thank you,