Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During this first year, the company produced 1,025 kayaks and sold 775. at a price of $1,025 each. At this first year-end, the company reported the following income statement information using absorption costing. Sales (775 x $1,025) $794,375
Cost of goods sold (775 x $475) 368,125
Gross margin426,250
Selling and administrative expenses 220,000
Net income $206,250
Additional Information:
a. Production cost per kayak totals $475, which consists of $375 in variable production cost and $100 in fixed production cost-the latter amount is based on $102,500 of fixed production costs allocated to the 1,025 kayaks produced.
b. The $220,000 in selling and administrative expense consists of $85,000 that is variable and $135,000 that is fixed.
Required: Prepare an income statement for the current year under variable costing.