Hayek Bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. For its first month of operations, 350 bikes were produced and 225 were sold; this left 125 bikes in ending inventory. The income statement information under variable costing follows. Sales (225 $1,750) $ 393,750 Variable product cost (225 $625) 140,625 Variable selling and administrative expenses (225 $65) 14,625 Contribution margin 238,500 Fixed overhead cost 56,000 Fixed selling and administrative expense 90,000 Net income $ 92,500 1. Prepare this company's income statement for its first month of operations under absorption costing. 2. Fill in the blanks:

Required 1 Required 2 Prepare an income statement for the current year under absorption costing. KENZI KAYAKING Absorption Costing Income Statement Net income (loss) Fixed costs added to inventory Required 1 Required 2 > The dollar difference in variable costing income and absorption costing income = units fixed overhead per unit. Required 1 Required 2 >