Comox Company sells garden chairs for $65 each. The current production level is 25,000 chairs, and

only 20,000 units are sold in the current year. Assume the production volume variance is written off to

other expenses at the end of the period. (10)

Unit manufacturing costs are:

Direct materials$12.00

Direct manufacturing labour$18.00

Variable manufacturing costs$9.00

Total fixed manufacturing costs$180,000

Marketing expenses $6.00 per unit, plus $60,000 per year

Required:

a.Prepare income statement using absorption costing.

b.Prepare income statement using variable costing.