The Octavius Company produces a 10-inch chef knife used by commercial chefs. The knives sell for $200 each. In 2020, the company produced 10,000 units and sold 8,000 units. There was no beginning inventory. Following are variable and full costing income statements for 2020. 

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, 2020 Sales $1,600,000 Less variable costs: Variable cost of goods sold $800,000 Variable selling expense Contribution margin 160,000 960,000 640,000 Less fixed costs: Fixed manufacturing expense 300,000 Fixed selling expense Fixed administrative expense 100,000 200,000 600,000 Net income $ 40,000 Income Statement Prepared Using Full Costing Octavius Company Income Statement For the Year Ending December 31, 2020 Sales $1,600,000 Less cost of goods sold 1,040,000 Gross margin 560,000 Less selling and administrative expenses: Selling expense $260,000 Administrative expense 200,000 460,000 Net income $ 100,000