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 $475)

368,125

Gross margin

426,250

Selling and administrative expenses

220,000

Net income

$

206,250

Additional Information

a.

Production cost per kayak totals $475, which consists of $375 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.

b.

The $220,000 in selling and administrative expense consists of $85,000 that is variable and $135,000 that is fixed.

Required

1.

Prepare an income statement for the current year under variable costing.

KENZI KAYAKING
Variable Costing Income Statement
Net income (loss)