Variable and Assorption Costing The following data were adapted feom a recent income statement of Caterpillar InC. (CAT) for the year ended December 31 : Assume that $5,670 million of cost of goods sold and $1,290 milien of selling, admunistative, and other expenses were fxed c of the year were as follows: Also, assume that 30% of the beginning and ending irwentories were foed costs. Caterplitar Inc. b. Explain the difference between the amount of operating income repocted under the absorption costing and variable costing concepts. The operating income under the variable costing concept be the same as the operating income under the absorption costing concept when the inventories ether increase or decrease during the year In this case, Caterplibr's inventory , meaning it sold than it manufactured. As a result, the operating income under the variable costing concept will be than the operating income under the abserption costing concept. The reason is because the variable costing concept deduct the fixed costs in the period that they are incurred, regardless of changes in inventory balances