Houston Inc. has prepared the following variable costing income statement.

	Units	$ per Unit	$
Revenue	400,000	6.00	$2,400,000
Variable costs:
Beginning inventory	26,000	3.80	98,800
Variable manufacturing costs	404,000	3.80	1,535,200
	430,000		1,634,000
Less: Ending inventory	(30,000)	3.80	(114,000)
	400,000		1,520,000
Variable marketing costs	400,000	0.70	280,000
Total variable costs			1,800,000
Contribution margin			600,000
Fixed manufacturing costs			360,000
Fixed SG&A			90,000
Operating income			$150,000

Please Show Work

1. Using the above information and assuming the fixed manufacturing cost allocation rate is $0.90 per unit, prepare an income statement using absorption accounting.
2. Why is the operating income different between variable costing and absorption costing in this situation? Provide a reconciliation.