During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 40,000 mini refrigerators, of which 36,000 were sold. Operating data for the month are summarized as follows:

1	Sales		$8,280,000.00
2	Manufacturing costs:
3	Direct materials	$2,800,000.00
4	Direct labor	1,200,000.00
5	Variable manufacturing cost	800,000.00
6	Fixed manufacturing cost	440,000.00	5,240,000.00
7	Selling and administrative expenses:
8	Variable	$540,000.00
9	Fixed	216,000.00	756,000.00

Required:

1.

Prepare an income statement based on the absorption costing concept.*

2.

Prepare an income statement based on the variable costing concept.*

3.

Explain the reason for the difference in the amount of income from operations reported in (1) and (2).

* Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.

1. Prepare an income statement based on the absorption costing concept. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.

Kodiak Fridgeration Company

Absorption Costing Income Statement

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2. Prepare an income statement based on the variable costing concept. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.

Kodiak Fridgeration Company

Variable Costing Income Statement

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3. Explain the reason for the difference in the amount of income from operations reported in (1) and (2).

The income from operations reported under costing exceeds the income from operations reported under costing by the difference between the two, due to manufacturing costs that are deferred to a future month under costing.