Kenzi Kayaking, a manufacturer of kayaks, began operations this year, During this first year, the company produced 1.050 kayaks and sold 800 at a price of $1,050 each. At this first year-end, the company reported the following income statement information using absorption costing Sales (800 * $1,050) Cost of goods sold (800K $500) Gross margin Selling and administrative expenses Net income $ 840,000 400,000 440,000 230,000 $ 210,000 Additional Information a. Product cost per kayak totals $500, which consists of $400 in variable production cost and $100 in fixed production cost-the latter amount is based on $105,000 of fixed production costs allocated to the 1.050 kayaks produced. b. The $230,000 in selling and administrative expense consists of $75,000 that is variable and $155,000 that is fixed. Required 1. Prepare an income statement for the current year under variable costing. KENZI KAYAKING Variable Costing Income Statement $ Sales Less: Variable costs 840,000 735.000 Variable product costs Variable selling and administrative expenses 75.000 810.000 345.000 Total variable costs Contribution margin Less: Fixed expenses Fixed selling and administrative costs Fixed overhead costs $ 155.000 105,000 Total fixed expenses Net income (loss) 260.000 $ 85.000 Net income under absorption costing is higher than net income under vanable costing by Fixed costs added to inventory