A company produces a product with the following data:

• Variable cost per unit: $10
• Fixed manufacturing costs: $50,000
• Units produced: 10,000
• Units sold: 8,000
• Selling price per unit: $20

Requirements:

(a) Prepare the income statement using variable costing. (b) Prepare the income statement using absorption costing. (c) Reconcile the difference in net income. (d) Discuss the advantages and disadvantages of each costing method.