Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During this first year, the company produced 1,075 kayaks and sold 825. at a price of $1,075 each. At this first year-end, the company reported the following income statement information using absorption costing. Sales (825 $1,075) $ 886,875 Cost of goods sold (825 $475) 391,875 Gross margin 495,000 Selling and administrative expenses 240,000 Net income $ 255,000 Additional Information

a. Product cost per kayak totals $475, which consists of $375 in variable production cost and $100 in fixed production costthe latter amount is based on $107,500 of fixed production costs allocated to the 1,075 kayaks produced.

b. The $240,000 in selling and administrative expense consists of $105,000 that is variable and $135,000 that is fixed.

Required 1. Prepare an income statement for the current year under variable costing.