During the first month of operations ended May 31, 2016, Frost Point Fridge Company manufactured 40,000 mini refrigerators, of which 36,000 were sold. Operating data for the month are summarized as follows:

Instructions
1. Prepare an income statement based on the absorption costing concept.
2. Prepare an income statement based on the variable costing concept.
3. Explain the reason for the difference in the amount of income from operations reported in (1) and (2).

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Sales Manufacturing costs: $6,480,000 $3,200,000 Direct labor . .. 1,120,000 880,000 560,000 5,760,000 Selling and administrative expenses: Variable.... Fixed 648,000 28.00 936,000