2.) Rubber Sole is a division of Shoes Products Corporation. The division manufactures

and sells rubber soles. Last year, the division manager decided to produce 250,000 units, however total sales were 220,000 units for $9 per unit. Other information is presented below:

Division Information for 2020

Beginning inventory 0

Sales in units 220,000 units

Selling price per unit $9

Variable manufacturing costs per unit $3

(DM+DL+Variable MOH)

Fixed manufacturing overhead costs (total) $500,000

Production amount 250,000 units

Variable selling and administrative expense $0.30

Fixed selling and administrative expense (total) $17,000

(a) Prepare an absorption costing income statement.

(b) Prepare a variable costing income statement.

(c) Reconcile the difference in operating incomes under the two approaches and explain what accounts for this difference.