The Octavius Company produces a 10-inch chef knife used by commercial chefs. The knives sell for $50 each. In 2017, the company produced 50,000 units and sold 45,000 units. There was no beginning inventory. Following are variable and full costing income statements for 2017.

Required
Reconcile the difference in profit between the two income statements.

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Income Statement Prepared Using Variable Costing Octavius Company Income Statement For the Year Ending December 31, 2017 Sales $2,250,000 Less variable costs: Variable cost of goods sold Variable selling expense $650,000 150,000 800,000 Contribution margin 1,450,000 Less fixed costs: Fixed manufacturing expense Fixed selling expense Fixed administrative expense 600,000 150,000 100,000 850,000 $ 600,000 Net income Income Statement Prepared Using Full Costing Octavius Company Income Statement For the Year Ending December 31, 2017 Sales $2,250,000 Less cost of goods sold 1,190,000 Gross margin Less selling and administrative 1,060,000 expenses: Selling expense Administrative expense $300,000 400,000 100,000 $ 660,000 Net income