Exercise 6-4 Variable costing income statement LO P2

Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During this first year, the company produced 1,025 kayaks and sold 775. at a price of $1,025 each. At this first year-end, the company reported the following income statement information using absorption costing.

Sales (775 $1,025)	$	794,375
Cost of goods sold (775 $475)		368,125
Gross margin		426,250
Selling and administrative expenses		210,000
Net income	$	216,250

Additional Information

Product cost per kayak totals $475, which consists of $375 in variable production cost and $100 in fixed production costthe latter amount is based on $102,500 of fixed production costs allocated to the 1,025 kayaks produced.

The $210,000 in selling and administrative expense consists of $75,000 that is variable and $135,000 that is fixed.

Required

1. Prepare an income statement for the current year under variable costing.

NET INCOME UNDER ABSORPTION COSTING IS HIGHER THANN NET INCOME UNDER VARIABLE COSTING BY: NUMBER OF UNITS ADDED TO (SUBTRACTED FROM) INVENTORY: fIXED OVERHEAD COST PER UNIT