On December 31 of last year, a fire destroyed the bulk of the accounting records of Hudson Company, a small, one-product manufacturing firm. In addition, the chief accountant mysteriously disappeared. You have the task to reconstruct last year’s records. The general manager has said that the accountant had been experimenting with both absorption costing and variable costing.
The records are a mess, but you have gathered the following data for last year:
OpEeratimGioroilttaOSO;ouon-COSIING DASIS... 9. aay ne soe oe eae $ 150,000 Notesreceivable fromicniei ACCOUNTANE «

a. at cue ee bes eee oe 14,000 SOP iO wo MMANG MenSile cess eswse Se teaesed Mirase eran. weeno s 270,000 RAW aIMaALehalNOUNChASCS ac emamacih arn an nacre accu We, Reno tas Stam uses 175,000 Actual selling and administrative costs (all fixed) .............. 00005. 21,000 OSS MMs Bo BRA BEE Bae REE A eA TT eR ie ere 171,000 SUES 6b sooo 6 Be abe: te nn UTE oe nner trs FS errr oe reer 540,000 ActualitixedimanviaciUnnG COStS IMCUMEGs eases qecesseha6se. sas.a. - 66,000 Actual variable manufacturing costs per unit for last year and for units in beginning finished-goods Ve MOM anUahymmOnlaStCalernti mara re fae sts aan: The company had no beginning or ending work-in-process inventories. You also learn that the absorption cost per unit in last year’s beginning finished-goods inventory is the same as the absorption cost per unit for units produced during the year.
Required

a. Prepare a comparative income statement on an absorption-costing and a variable-costing basis.

b. Ata meeting with the board of directors, the following questions were raised:
1. How many units did we sell last year?
2. How many units did we produce last year?
3. What were the unit production costs last year under both absorption and variable costing? Write a short report responding to these questions.

c. Reconcile the operating profit under variable costing with that under absorption costing, showing the exact source of the difference.