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, 375 bikes were produced and 225 were sold; this left 150 bikes in ending inventory. The income statement information under variable costing follows.

Sales (225 x $1,600) Variable product cost (225 x $625) Variable selling and administrative expenses (225 * $65) Contribution margin Fixed overhead cost Fixed selling and administrative expense Net income $ 360,000 140,625 14,625 204,750 56, 250 75,000 $ 73,500 1. Prepare this company's income statement for its first month of operations under absorption costing HAYEK BIKES Absorption Costing Income Statement Sales $ 360,000 Variable product costs $ 140,625 Fixed overhead costs 33,750 Cost of goods sold Gross margin 174,375 185,625 Variable selling and administrative expenses Fixed selling and administrative costs 14,625 75,000 89,625 Total selling general and administrative expenses Net income (loss) $ 96,000 $ 22,500 Net income under absorption costing is higher than net income under variable costing by: Number of units added to(subtracted from) inventory Fixed costs added to inventory