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

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)?

Sales (2,000 units) Production costs (2,400 units): $600,000 Direct labor Fixed factory overhead Variable selling and administrative expenses........... .. .. . .. $300,000 115,200 43,200 21,600 480,000 Seling and administrative expenses $50,000 22,000 Fixed selling and administrative expenses... .. . . . .. . 72,000 .. ..