Answer:
Absorption Costing Net Income  1008,000
Variable Costing Net Income     976,000
Explanation:
<u><em>Kodiak Fridgeration Company</em></u>
Units Produced = 80,000
Units Sold = 72,000
Ending Inventory = 8000
<u>Per Units Cost </u>
 Direct materials $6,400,000/80,000 = $ 80
 Direct labor 1,600,000 /80,000= $ 20
 Variable manufacturing cost 1,280,000/80,000= $ 16
 Fixed manufacturing cost 320,000 /80,000 = $ 4            
Absorption Manufacturing Cost  per unit= 9,600,000/80,000= $ 120
Variable Manufacturing Costs per unit = $ 116
<u><em></em></u>
<u><em>Kodiak Fridgeration Company</em></u>
<u><em>Income Statement </em></u>
<u><em>Absorption Costing</em></u>
 <u>Sales                                                              $10,800,000 </u>
 Manufacturing costs: 
 Direct materials $6,400,000
 Direct labor 1,600,000 
 Variable manufacturing cost 1,280,000
 Fixed manufacturing cost 320,000                 9,600,000
Less Ending Inventory (8000*120)                     (960,000)
<u>Cost of Goods Sold                                           86,40,000</u>
Gross Profit                                                         2160,000
Selling and administrative expenses: 
Variable $ 72,000* 13.5=                                    972,000
Fixed                                                                      180,000                                                  
Net Income                                                        1008,000
<em><u>Kodiak Fridgeration Company</u></em>
<em><u>Income Statement </u></em>
<em><u>Variable Costing</u></em>
 Sales                                                              $10,800,000 
 Variable manufacturing cost
(80,000*116)                                                       9280,000
Less Ending Inventory ( 8000*116)                     928,000
<u>Cost of Goods Sold                                           83,52,000</u>                   
Gross Contribution Margin                                 2448,000
Variable Selling and administrative expenses 
(72000 * $1,080,000/80,000)                              972,000
Contribution Margin                                            1476,000
Less Fixed Expenses
Fixed manufacturing cost 320,000
Fixed 180,000                                                    500,000
Net Income                                                          976,000
3. The difference in absorption and variable costing income is because in absorption costing the fixed costs are treated as unit cost and in variable costs the fixed costs are treated as period costs. Also the fixed costs of the ending units is deducted in absorption costing where it is not deducted in variable costing.