3. Leathers, Inc. produces ladies wallets. Selected data for last year follow: Production (units) 100,000 Direct materials $ 75,000 Sales (units) 90,000 Direct labor 250,000 Beginning inventory 0 Variable overhead 20,000 Selling price per unit $ 5.50 Fixed overhead 50,000 Variable selling & admin. 30,000 Fixed selling & admin. 60,000

Req:

a. Compute the cost of ending inventory and net income using variable costing.

b. Compute the cost of ending inventory and net income using absorption costing.