Digital Edge Inc. assembles and sells MP3 players. The company began operations on May 1, 2010, and operated at 100% of capacity during the first month. The following data summarize the results for May:

a. Prepare an income statement according to the absorption costing concept.
b. Prepare an income statement according to the variable costing concept.
c. What is the reason for the difference in the amount of income from operations reported in (a) and(b)?

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Sales (14,000 units) Production costs (18,000 units): $1,820,000 Direct materials. . . $865,800 421,200 210,600 140,400 . Direct labor. Fixed factory overhead Variable selling and administrative expenses. 1,638,000 Selling and administrative expenses: $254,800 100,000 Fixed selling and administrative expenses.. 354,800