What is the reason for the difference in the amount of operating income reported in (a) and (b)? Under the fill in the blank 1 of 3 method, the fixed manufacturing cost included in the cost of goods sold is matched with the revenues. Under fill in the blank 2 of 3 , all of the fixed manufacturing cost is deducted in the period in which it is incurred, regardless of the amount of inventory change. Thus, when inventory increases, the fill in the blank 3 of 3 income statement will have a higher operating income