Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During this first year, the company produced 1,025 kayaks and sold 775 at a price of $1,025 each. At this first year-end, the company reported the following income statement information using absorption costing.

Sales (775 $1,025)	$	794,375
Cost of goods sold (775 $500)		387,500
Gross margin		406,875
Selling and administrative expenses		230,000
Net income	$	176,875

Additional Information

1. Product cost per kayak totals $500, which consists of $400 in variable production cost and $100 in fixed production costthe latter amount is based on $102,500 of fixed production costs allocated to the 1,025 kayaks produced.
2. The $230,000 in selling and administrative expense consists of $95,000 that is variable and $135,000 that is fixed.

Required: 1. Prepare an income statement for the current year under variable costing. 2. Fill in the blanks:

KENZI KAYAKING Variable Costing Income Statement Net income (loss) The dollar difference in variable costing income and absorption costing income = units fixed overhead per unit