Hayek Bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. For its first month of operations, 400 bikes were produced and 240 were sold; this left 160 bikes in ending inventory. The income statement information under variable costing follows. Sales (240 x $1,750) Variable product cost (240 * $ 700) Variable selling and administrative expenses (240 x $65) Contribution margin Fixed overhead cost Fixed selling and administrative expense Net income $ 420,000 168,000 15,600 236, 400 68,000 80,000 $ 88,400 1. Prepare this company's income statement for its first month of operations under absorption costing. 2. Fill in the blanks: Required 1 Required 2 Prepare an income statement for the current year under absorption costing. KENZI KAYAKING Absorption Costing Income Statement Sales 420,000 Less: Cost of goods sold Fixed overhead costs Variable product costs $ 40,800 40,800 Gross margin Selling general and administrative expenses Fixed selling and administrative costs Net income (loss) Net income under absorption costing is higher than net income under variable costing by: Fixed costs added to inventory Required 1 Required 2 Fill in the blanks: The dollar difference in variable costing income and absorption costing income = units fixed overhead per unit. Required 1 Required 2