Rugged Gear Inc. manufactures and sells men's athletic clothes. The company began operations on July 1, 2010, and operated at 100% of capacity (44,000 units) during the first month, creating an ending inventory of 4,000 units. During August, the company produced 40,000 garments during the month but sold 44,000 units at $110 per unit. The August manufacturing costs and selling and administrative expenses were as follows:

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

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Number of Units Unit Cos Total Cost Manufacturing costs i August beginning inventory: 4,000 4,000 $44.00 16.00 $60.00 Variable-- S176,000 64,000 240,000 Total.. August manufacturing costs Variable Fixed - 40,000 40,000 $44.00 17.60 $1.760,000 704,000 $2,464,000 $61.60 Selling and administrative expenses: Variable ($20.90 per unit sold)... S 919,600 350,000 $1,269,600