Variable and Absorption CostingThe following data were adapted from a recent income statement of Ansara Company for the year ended December $31$:$($in millions$)$Sales$$17,590$Cost of goods sold$$(14,950)$Selling$,$ administrative, and other expenses$(1,580)$Total expenses$$(16,530)$Operating income$$1,060$Assume that $$3,830$ million of cost of goods sold and $$870$ million of selling, administrative, and other expenses were fixed costs. Inventories at the beginning and end of the year were as follows:Beginning inventory$$2,090$Ending inventory$$2,440$Also, assume that $20\%$ of the beginning and ending inventories were fixed costs.Question Content Areaa. Prepare an income statement according to the variable costing concept for Ansara Company. Round numbers to nearest million.Ansara CompanyVariable Costing Income Statement $($assumed$)$For the Year Ended December $31$Contribution marginFixed manufacturing costsSalesVariable cost of goods soldVariable selling and administrative expenses$SalesVariable cost of goods sold:Beginning inventory$fill in the blank fcd$14$e$0$cbfa$0$fee$\_3$Manufacturing marginSalesVariable cost of goods manufacturedVariable cost of goods soldVariable selling and administrative expensesVariable cost of goods manufacturedContribution marginEnding inventoryFixed manufacturing costsManufacturing marginVariable cost of goods manufacturedEnding inventoryManufacturing marginSalesTotal variable cost of goods manufacturedTotal variable cost of goods soldTotal variable selling and administrative expensesTotal variable cost of goods soldContribution marginFixed manufacturing costsManufacturing marginVariable cost of goods soldVariable selling and administrative expenses$Manufacturing marginContribution marginFixed factory overheadManufacturing marginVariable cost of goods soldVariable selling and administrative expensesVariable selling and administrative expensesContribution marginFixed selling and administrative expensesManufacturing marginSalesVariable cost of goods manufactured$Manufacturing marginFixed costs:Fixed contribution marginFixed manufacturing costsFixed salesVariable cost of goods manufacturedVariable cost of goods sold$Fixed manufacturing costsFixed selling and administrative expensesFixed manufacturing marginVariable cost of goods manufacturedVariable cost of goods soldVariable selling and administrative expensesFixed selling and administrative expensesContribution marginOperating incomeManufacturing marginSalesTotal fixed costsTotal fixed costsOperating incomeOperating loss$Operating incomeQuestion Content Areab. Explain the difference between the amount of operating income reported under the absorption costing and variable costing concepts.The income from operations under the variable costing conceptwillwill notbe the same as the income from operations under the absorption costing concept when the inventories either increase or decrease during the year. In this case, Ansaras inventoryincreaseddecreased, meaning it soldmorelessthan it produced. As a result, the income from operations under the variable costing concept will bemorelessthan the income from operations under the absorption costing concept. The reason is because the variable costing conceptdoesdoes notdeduct the fixed costs in the period that they are incurred, regardless of changes in inventory balances.