Variable costing income statement

The following data were adapted from a recent income statement of Procter & Gamble Company:

(in millions)

Sales ......................................................................... $84,167

Operating costs:

Cost of products sold...................................................... $42,428

Marketing, administrative, and other expenses............................. 30,337 Total operating costs................................................... $72,765

Income from operations ...................................................... $11,402

Assume that the variable amount of each category of operating costs is as follows:

(in millions)

Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23,760

Marketing, administrative, and other expenses ................................ 12,135

a. Based on the data given, prepare a variable costing income statement for Procter & Gamble Company, assuming that the company maintained constant inventory levels during the period.

b. If Procter & Gamble reduced its inventories during the period, what impact would that have on the income from operations determined under absorption costing?