During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 44,000 mini refrigerators, of which 39,000 were sold. Operating data for the month are summarized as follows:

1	Sales		$7,020,000.00
2	Manufacturing costs:
3	Direct materials	$3,080,000.00
4	Direct labor	1,056,000.00
5	Variable manufacturing cost	880,000.00
6	Fixed manufacturing cost	616,000.00	5,632,000.00
7	Selling and administrative expenses:
8	Variable	$663,000.00
9	Fixed	273,000.00	936,000.00

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.