Income statements under absorption costing and variable    costing

Bionic Cotton Inc. manufactures and sells high-quality sporting goods equipment under its highly recognizable Cool Cat logo. The company began operations on January 1, 2016, and operated at 100% of capacity (90,000 units) during the first month, creating an end- ing inventory of 8,000 units. During February, the company produced 82,000 garments during the month but sold 90,000 units at $100 per unit. The February manufacturing costs and selling and administrative expenses were as follows:

 

Â	Number of Units	  Unit Cost	Â	  Total Cost
Manufacturing costs in February beginning inventory:	Â	Â	Â	Â
Variable...............................................	8,000	$50	Â	$   400,000
Fixed    .................................................	8,000	  10	Â	          80,000
Total   ..............................................	Â	$60	Â	$   480,000
February  manufacturing costs:	Â	Â	Â	Â
Variable...............................................	82,000	$50	Â	$4,100,000
Fixed    .................................................	82,000	  12	Â	      984,000
Total   ..............................................	Â	$62	Â	$5,084,000

Selling and administrative expenses:

 

Variable  ..............................................	$1,350,000
Fixed    .................................................	      324,000
Total   ..............................................	$1,674,000

 

d.    Prepare an income statement according to the absorption costing concept for February.

e.     Prepare an income statement according to the variable costing concept for February.

f.      What is the reason for the difference in the amount of income from opera- tions reported in (a) and (b)?