Variable cost of goods sold per unit $5.00

Fixed cost of goods sold per unit $4.00

Variable operating expenses per unit $1.50

Fixed operating expenses per unit $1.25

Selling price $12.00

No beginning finished goods inventory.

Number of units sold 18,000

Number of units produced 20,000

As the accounting manager, you have calculated the net income amounts under the variable costing and traditional costing methods by using the information given above and reported the results to the general manager as follows.

Traditional Costing - $2,000 net income

Variable Costing - $6.000 net loss

Seeing that the two results are different, the general manager asked the reason for the difference. How would you explain this difference? (Reconcile the difference, show your calculations)