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. . . . . . . . . . . . . $9 Variable selling and administrative expense per unit sold. . . . . $2 Fixed manufacturing overhead costs (total) . . . . . . . . . . . . . . . $314700 Using the above data, Kim presented the following income statement: Sales (21000 units) . . . . . . . . . . . . . . . . . . . . . . . . . . $861000 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . $443180.7692307693 Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $417819.2307692307 Selling and administrative expenses . . . . . . . . . . . . $239100 Net operating income. . . . . . . . . . . . . . . . . . . . . . . . . $178719.2307692307

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).