Appendix Variable costing income statement On July 31, 2016, the end of the first month of operations, Rhys Company prepared the following income statement, based on the absorption costing concept:

Sales (96,000 units). . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,440,000 Cost of goods sold:

Cost of goods manufactured. . . . . . . . . . . . . . . . $3,120,000 Less ending inventory (24,000 units). . . . . . . . 624,000 Cost of goods sold. . . . . . . . . . . . . . . . . . . . . . . . . . 2,496,000 Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,944,000 Selling and administrative expenses. . . . . . . . . . . . 288,000 Income from operations. . . . . . . . . . . . . . . . . . . . . . . . $1,656,000

a. Prepare a variable costing income statement, assuming that the fixed manufacturing costs were $132,000 and the variable selling and administrative expenses were $115,200.

b. Reconcile the absorption costing income from operations of $1,656,000 with the variable costing income from operations determined in (a).