E'Lonte Company began operations this year. During this first year, the company produced 300.000 units Variable costing and sold 250,000 units. Its income statement under absorption costing for this year follows.

Additional information
a. Selling and administrative expenses consist of $ 1,200,000 in annual fixed expenses and $4 per unit in variable selling and administrative expenses.
b. The company's product cost of $7.50 per unit is computed as follows.
Direct materials..............................................$2.00 per unit
Direct labor...................................................$2.40 per unit
Variable overhead...........................................$1.60 per unit
Fixed overhead ($450,000/300,000 units)...............$150 per unit
Required
1. Prepare the company's income statement under variable costing.
2. Explain any difference between the company's income under variable costing (from part 1) and the income reported above.

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$4,500,000 Cost of goods sold Cost of goods manufactured (300,000 units X $7.50 per unit) Cost of goods available for sale . . . . . . . . . . 2,250,000 2,250,000 375,000 Cost of goods sold 1.875,000 2,625,000 2.200,000 $ 425,000 Selling and administrative expenses . .. . . . . . . . . . .. .