Variant creation issue in V13.1.0

On V13.1.0, I am not able to create item variant successfully. When I select an item template, I am able to use it to create the item variant. But the system labels the VARIANT as a TEMPLATE instead of labeling it as a VARIANT. So I end up with two item TEMPLATES instead of one template and one variant.
Could somebody assist on how to resolve this issue.
See attached screenshots.


Is this the first time you have attempted to create a variant for this (or any) Item, or have you been able to create variants in the past?

Make sure the checkbox for Has Variants wasn’t checked .

What attribute is the variant based on?