Varilux manufactures a single product and sells it for $ 25 per unit. At the beginning of the year there were 1,000 units in inventory. Under FIFO, each unit was attributed to last years production. The unit production costs last year were $ 5.00 per unit for variable production costs (direct materials, direct labor, and variable overhead) and $ 9.00 of fixed overhead costs.

During the 2019 Varilux produced 10,000 units of product and sold 10,200 units. Each unit produced generated $ 5.00 of variable manufacturing cost. Total fixed overhead cost for the current year was $ 85,000. Under the FIFO assumption, the 800 unsold units were manufactured in the current year.

Assume a 20 percent tax rate.

1. Prepare an absorption cost basis income statement for the current year.
2. Prepare a variable cost basis income statement for the current year. and the other on.
3. Explain any difference between the two net income numbers and provide calculations supporting your explanation of the difference.