Variable vs Absorption Costing

Mohammed Enterprises produces plastic computer disk storage containers. Each container sells for $10 and has the following standard production costs:

Direct Materials $0.90

Direct Labor $0.20

Variable Overhead $1.40

Total $2.50

Fixed overhead of $137,600 is based on expected production of 86,000 containers. During 2020, the company produced 88,000 storage containers and sold 89,000 containers. Selling and administrative costs for the year were $0.70 per container (variable) and $100,000 fixed.

1. Prepare Income Statements in good form for 2020 assuming variable and absorption costing. Variable Absorption
2. Reconcile the difference between the operating income for variable costing vs. absorption.

We weren't given beginning inventory.