The Carpenter Manufacturing Co. provided the following data pertaining to its operations for the current calendar year: mi5

Required:
a Construct two independent income statements using standard production costs for inventories and cost of goods manufactured. Construct one income statement using the absorption costing method and another using the direct costing method. Ignore income taxes.
b Reconcile the difference in net incomes shown by the two methods.

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Product units: Beginning inventory. 10,000 Produced. 90,000 Sold 85,000 Ending inventory 15,000 Standard costs per product unit: Direct materials $3.25 Direct labor.. 4.25 Variable overhead 1.50 $ 9.00 Fixed overhead.. 2.00 Total... $11.00 Selling and administrative expenses: Variable $200,000 Fixed... 80,000 Selling price per unit $16.00 Assume there was no under- or overapplied overhead.