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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27000 Sales in units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22000 Variable manufacturing cost per unit produced. . . . . . . . . . . . . $6 Variable selling and administrative expense per unit sold. . . . . $1 Fixed manufacturing overhead costs (total) . . . . . . . . . . . . . . . $316300 Using the above data, Kim presented the following income statement: Sales (22000 units) . . . . . . . . . . . . . . . . . . . . . . . . . . $946000 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . $389725.92592592596 Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $556274.074074074 Selling and administrative expenses . . . . . . . . . . . . $220000 Net operating income. . . . . . . . . . . . . . . . . . . . . . . . . $336274.07407407404

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).