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 didnt 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 businesss the first year of operation follow:

Production in units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26000

Sales in units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21000

Variable manufacturing cost per unit produced. . . . . . . . . . . . . $7

Variable selling and administrative expense per unit sold. . . . . $2

Fixed manufacturing overhead costs (total) . . . . . . . . . . . . . . . $313200

Using the above data, Kim presented the following income statement:

Sales (21000 units) . . . . . . . . . . . . . . . . . . . . . . . . . . $861000

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . $399969.23076923075

Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $461030.76923076925

Selling and administrative expenses . . . . . . . . . . . . $222800

Net operating income. . . . . . . . . . . . . . . . . . . . . . . . . $238230.76923076925

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

B. explain why the net income between the two methods differ