Kenzi, a manufacturer of kayaks, began operations this year. During this year, the company produced 1,075 kayaks and sold 825 at a price of $1,075 each. At year-end, the company reported the following income statement information using absorption costing Sales (825 $1,075) Cost of goods sold (825 x $400) Gross profit Selling and administrative expenses Income Additional Information $ 886,875 330,000 556,875 220,000 $ 336,875 a. Product cost per kayak under absorption costing totals $400, which consists of $300 in direct materials, direct labor, and variable overhead costs and $100 in fixed overhead cost. Fixed overhead of $100 per unit is based on $107,500 of fixed overhead per year divided by 1,075 kayaks produced. b. The $220,000 in selling and administrative expenses consists of $75,000 that is variable and $145,000 that is fixed. Prepare an income statement for the current year under variable costing. KENZI Income Statement (Variable Costing) Sales $ 886,875 Less Variable expenses Variable cost of goods sold $ 288,750 Variable selling and administrative expenses 75,000 Variable overhead costs 363,750 Contribution margin 523,125