Budgeted fixed overhead in 20x1, the company's first year of operations, was $600,000. Actual production was 200,000 ten-gallon containers, of which 190,000 were sold.

Skinny Dippers Inc. incurred the following selling and administrative expenses.

Fixed $200,000for the year

Variable $3per container sold

Required:

1.Compute the product cost per container of frozen yogurt under (a) variable costing and (b) absorption costing.

2-a.Create an operating income statement for 20x1 using absorption costing.

2-b.Create an operating income statement for 20x1 using variable costing.

3.Reconcile the operating income reported under the two methods by listing the two key places where the income statements differ.

4.Reconcile the operating income reported under the two methods using the shortcut method.

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