Question
Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. The company had...
Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. The company had no beginning inventory in the prior year. These data summarize the current and prior year operations:
| Prior Year | Current Year | |||||
| Sales | 1,800 | units | 2,200 | units | ||
| Production | 2,000 | units | 2,000 | units | ||
| Production cost | ||||||
| Factory—variable (per unit) | $ | 0.60 | $ | 0.60 | ||
| —fixed | $ | 1,000 | $ | 1,000 | ||
| Marketing—variable | $ | 0.40 | $ | 0.40 | ||
| Administrative—fixed | $ | 500 | $ | 500 | ||
Required:
1. Prepare an income statement for each year based on full costing.
2. Prepare an income statement for each year based on variable costing.
3. Prepare a reconciliation of the difference each year in the operating income resulting from using the full costing method and variable costing method.
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