1. Comparative income statementsvariable and absorption costing
Highlands Manufacturing Company has determined the cost of manufacturing a unit of product to be as follows, based on normal production of 50,000 units per year:
Direct materials			$10
Direct labor			8
Variable factory overhead			6
			$24
Fixed factory overhead			6
			$30
Operating statistics for the months of July and August are as follows:
					July	August
Units produced					6,000	4,000
Units sold					4,000	6,000
Selling and administrative expenses					$25,000	$25,000
The selling price is $40 per unit. There were no inventories on July 1, and there is no work in process at August 31.
Directions: Complete the comparative income statements on the next page for July and August for Highlands under:
	1. Absorption costing
	2. Variable costing