### Prepare an income statement for the current year

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Question - Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During this first year, the company produced 1,000 kayaks and sold 750. at a price of \$1,000 each. At this first year-end, the company reported the following income statement information using absorption costing.

Sales (750 × \$1,000) \$ 750,000

Cost of goods sold (750 × \$450) 337,500

Gross margin 412,500

Net income \$ 172,500

a. Production cost per kayak totals \$450, which consists of \$350 in variable production cost and \$100 in fixed production cost-the latter amount is based on \$100,000 of fixed production costs allocated to the 1,000 kayaks produced.

b. The \$240,000 in selling and administrative expense consists of \$95,000 that is variable and \$145,000 that is fixed.

Required - Prepare an income statement for the current year under variable costing.

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