During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 80,000 mini refrigerators, of which 72,000 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 $10,800,000 Manufacturing costs: $6,400,000 1,600,000 1,280,000 320,000 Direct labor. 9,600,000 Selling and administrative expenses Variable $1,080,000 180,000 1,260,000