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Information for Rafael Corp. is given in BE8.8.

Prepare absorption-costing income statement and reconcile the difference in net income under the two approaches.

a. Prepare an absorption-costing income statement.

b. Reconcile the difference between the net income under variable costing and the net income under absorption costing. That is, show a calculation that explains what causes the difference in net income between the two approaches.


During 2020, Rafael Corp. produced 40,000 units and sold 40,000 for $15 per unit. Variable manufacturing costs were $6 per unit. Annual fixed manufacturing overhead was $80,000 ($2 per unit). Variable selling and administrative costs were $2 per unit sold, and fixed selling and administrative expenses were $20,000. Prepare a variable-costing income statement.

Prepare a variable-costing income statement.


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