19.4

Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During this first year, the company produced 1,050 kayaks and sold 800 at a price of $1,050 each. At this first year-end, the company reported the following income statement information using absorption costing. Sales (800 x $1,050) Cost of goods sold (800 x $500) Gross margin Selling and administrative expenses Net income $840,000 400,000 440,000 230,000 $210,000 Additional Information a. Product cost per kayak totals $500, which consists of $400 in variable production cost and $100 in fixed production cost- the latter amount is based on $105,000 of fixed production costs allocated to the 1,050 kayaks produced. b. The $230,000 in selling and administrative expenses consists of $75,000 that is variable and $155,000 that is fixed. Required 1. Prepare an income statement for the current year under variable costing. 2. Fill in the blanks: The dollar difference in variable costing income and absorption costing income = fixed overhead per unit. units x Page 76