Final answer:
The differences in income between variable costing and absorption costing are attributed to the treatment of fixed costs, particularly in relations to inventory levels and production volume. Comparing profitability requires specific income statements that are not provided.
Step-by-step explanation:
Understanding Costing Methods:
When assessing profitability using different costing methods, it is important to understand how variable costing and absorption costing treat fixed costs. Variable costing only includes variable costs in the cost of goods sold, while absorption costing includes both fixed and variable costs.
January Income Differences
The difference in income from operations for January between the two methods (a and b) is due to how the fixed costs are treated. Under variable costing in January, if the company produced more than it sold, the fixed manufacturing overhead expenses would not be all expensed - some would be included in ending inventory. However, under absorption costing, a portion of these fixed costs would be allocated to each unit produced and therefore more of these costs would be expensed due to the higher production levels, resulting in a lower net income.
February Income Differences
In February, if production decreases but sales remain constant or increase, then under absorption costing, fewer units would absorb the fixed costs, which could lead to higher costs per unit and lower income. In contrast, variable costing would not be as affected by the production decrease because fixed costs are not included in product costs and are expensed entirely in the period.
Profitability Analysis
Based on the answers to (a) and (b), it is not possible to determine if Wardner Apparel operated more profitably in January or February without the specific income statements for each month. However, understanding the nuances of variable and absorption costing is key in assessing performance under different production and sales conditions.