Zavod, Inc., produces a single product and utilizes a standard cost system. Zavod has budgeted production costs for its first year of operations based on normal capacity of 11,000 units per year. The production budget includes the following costs. Direct materials Direct labor $4.00 per finished unit $3.25 per finished unit Variable manufacturing overhead $1.15 per finished unit $2.85 per finished unit Fixed manufacturing overhead In addition, Zavod has variable selling and administrative costs of $5.00 per unit and fixed selling and administrative costs of $81,000. During the year, Zavod produces 11,000 units and sold 10,000 units at $32 each. All variable costs were exactly as expected on a per unit basis, and all fixed costs were exactly as expected in total. Zavod's president has asked the controller to prepare an income statement under absorption costing and an income statement under variable costing.