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Income Statements under Absorption and Variable Costing Shawnee Motors Inc, assembles and se's MP3 players. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August Sales (16,000 units) $1,600,000 Production costs (21,000 units): Direct materials $777,000 Direct labor Variable factory overhead Fixed factory overhead 373,800 186,900 123,900 1,461,600 Seling and administrative expenses Variable selling and administrative expenses Fixed selling and administrative expenses $226,500 87,700 314,200 If required, round interim per unit calculations to the nearest cent a. Prepare an income statement according to the absorption costing concept, Shawnee Motors Inc. Absorption Costing Income Statement For the Month Ended August 31 b. Prepare an income statement according to the variable costing concept. Shawnee Motors Inc. Variable Costing Income Statement For the Month Ended August 31 Fixed costs Under the c. What is the reason for the difference in the amount of income from operations reported in (a) and (b)? method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory increases, the income statement we have a higher Income from operations than will the variable costing income statement

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