During 2020, Rafael Corp. produced 48,700 units and sold 38,960 for $16 per unit. Variable manufacturing costs were $4 per unit. Annual fixed manufacturing overhead was $77,920. Variable selling and administrative costs were $2 per unit sold, and fixed selling and administrative expenses were $18,100.

(a) Prepare an absorption-costing income statement.

(b) Reconcile the difference between the net income under variable costing and the net income under absorption costing. That is, show a calculation that explains what causes the difference in net income between the two approaches.

Rafael Corp. Income Statement-Absorption Costing For the Year Ended December 31, 2020 Sales $ 623360 Cost of goods sold Beginning inventory LA 0 Add : Costs of goods manufactured 272720 i Goods available for sale 272720 i Less Ending inventory 54544 i 218176 i Gross margin 405184 Less Selling and administrative expenses 96020 i Operating income before tax $ 309164 $ $ Variable costing net income Fixed manufacturing overhead costs deferred in ending inventory $ Absorption costing operating income