Frigid Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1, 2016, and operated at 100% of capacity during the first month. The following data summarize the results for July:

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 (35,000 units).... Production costs (42,500 units) $8,750,000 Direct materials.... $4,250,000 2,125,000 1,062,500 637 5008075,000 Selling and administrative expenses: Variable selling and administrative expenses.... . . . . Fixed selling and administrative expenses........... $1,150,000 200,000 1,350,000