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Trump and Kim started a new business manufacturing toy guns. They both kept separate set of accounts of their business. However, at the end of
Trump and Kim started a new business manufacturing toy guns. They both kept separate set of accounts of their business. However, at the end of the first year of operations their net incomes didn't match. A fight was about to start between the two owing to discrepancy in net incomes. Putin, their friend, asked them to present their income statements. As such information relating to the business's the first year of operation follow: Production in units 26000 Sales in units. 21000 Variable manufacturing cost per unit produced. $6 Variable selling and administrative expense per unit sold..... $2 Fixed manufacturing overhead costs (total). $319400 Using the above data, Kim presented the following income statement: Sales (21000 units).. $882000 Cost of goods sold $383976.9230769231 Gross margin $498023.0769230769 Selling and administrative expenses. $233400 Net operating income.. $264623.0769230769 Trump, on the other hand asked for your help to prepare a variable costing income statement. Prepare a variable costing income statement of Trump and Kim (5 marks) and explain why the net income between the two methods differ (2 marks)
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