The following data were adapted from a recent income statement of Procter & Gamble Company: (in millions)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $76,476

Operating costs:

Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $36,686

Marketing, administrative, and other expenses . . . . . . . . . . . . . . . . . . . . . . 24,340

Total operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $61,026

Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,450

Assume that the variable amount of each category of operating costs is as follows: (in millions)

Cost of products sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,500

Marketing, administrative, and other expenses . . . . . . . . . . . . . . . . . . . 9,700

a. Based on the above data, prepare a variable costing income statement for Procter & Gamble Company, assuming that the company maintained constant inventory levels during the period.

b. If Procter & Gamble reduced its inventories during the period, what impact would that have on the income from operations determined under absorption costing?