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 x $1,025) Cost of goods sold (775 x $450) $ 794,375 348,750 Gross margin Selling and administrative expenses 445,625 250,000 Net income $ 195,625 Additional Information a. Production cost per kayak totals $450, which consists of $350 in variable production cost and $100 in fixed production cost-the latter amount is based on $102,500 of fixed production costs allocated to the 1,025 kayaks produced. b. The $250,000 in selling and administrative expense consists of $95,000 that is variable and $155,000 that is fixed. Required 1. Prepare an income statement for the current year under variable costing. Required 1. Prepare an income statement for the current year under variable costing. KENZI KAYAKING Variable Costing Income Statement Sales Less: Variable costs 794,375 Variable production costs Variable selling and administrative expenses 95,000 Total variable costs 95,000 Contribution margin Less: Fixed expenses Fixed overhead costs Fixed selling and administrative costs Net income (loss) Net income under absorption costing is higher than net income under variable costing by: Fixed costs added to inventory