1. Exhibit 1 shows the Income Statements for the years ending January 31st, 2003, 2004 and 2006 using absorption costing. Generate Income Statements using Variable Costing. Assume that cost of goods sold and commissions are variable.

Exhibit 1 Hallstead Jewelers; Income Statements for Years Ended January 31 (thousands of dollars) 2003 2004 2006 $8,583 $8,102 4.326 4,132 $10,711 5,570 $ 5,141 $4,257 $3,970 Sales Cost of goods sold Gross margin Expenses Selling expense Salaries Commissions Advertising Administrative expenses Rent 2,081 3,215 2,021 429 405 536 254 250 418 425 435 420 420 840 84 84 142 122 Depreciation Miscellaneous expenses Total expenses Net income 53 $3,679 $ 578 93 $3,758 $ 212 $ 5,547 $ (406) Source: Casewriter Exhibit 2 Hallstead Jewelers Operating Statistics 2003 2004 2004 2006 Exhibit 2 Hallstead Jewelers Operating Statistics 2003 2004 2006 10.230 15.280 10,230 $ 839 5.341 $ 792 Sales space (square feet) Sales per square foot Sales tickets Average sales ticket $ 701 6.897 5,316 $ 1,524 $ 1,607 $ 1,553 Source: Casewriter