Which of the following describes how to handle variable income calculations?

The approach of comparing prior year monthly average and year-to-date income provides a comprehensive view of an individual's financial situation when handling variable income calculations. This method takes into account both the historical income patterns and the most recent earnings, ensuring a balanced perspective. By averaging the monthly income over the past year, it smooths out any anomalies that may be present in any single month, especially in cases where income can fluctuate due to factors such as seasonality or economic changes. Additionally, evaluating year-to-date income allows for capturing any recent changes in earnings that might not be reflected in the prior year's average, making it a dynamic measure that responds to current financial situations.

This method aligns well with the guidelines used in assessing the ability to handle mortgage payments, as it provides a clearer picture of an individual’s earning capability over time rather than a snapshot that could be misleading.