13-A4 Comparison of Absorption and Variable Costing Examine the Trahn Company's simplied nce statement based on variable costing. Assume that the budgcted volume for absoption costing in 20X0 and 20X1 was 1,400 units and that total fixed costs wen identical in 20NO and 20XI. There is no beginning or ending work in process. Income Statement Year Ended December 31,20XI $16,380 Sales. I,260 units at $13 Deduct variable costs $ 700 Beginning inventory, 100 units at $7 Variable manufacturing cost of goods manufactured, I.200 units at $7 Variable manufacturing cost of goods available for sale Ending inventory. 40 units at $7 Variable manufacturing cost of goods sold Variable selling and administrative expenses 8400 $9,100 280 $8.820 600 9.420 $6.960 Total variable costs Contribution margin Deduct fixed costs $4,900 350 Fixed factory overhead at budget Fixed selling and administrative expenses 5.250 $ 1.710 Total fixed costs Operating income . Assume that actual fixed costs wene 1. Prepare an income statement based on absorption costing equal to budgeted fixed costs. 2. Explain the difference in operating income between absorption costing and variable costing Be specific