Company has obtained the following data for the first year of operations:

Sales $2,868,750

Direct materials and labor $1,125,000

Variable manufacturing overhead $431,250

Fixed manufacturing overhead $656,250

Variable selling expenses $337,500

Fixed selling expenses $131,250

Variable selling expenses(per unit) $3.00

Units produced 125,000 Units sold 112,500

Units expected to be produced 125,000

Required:

A) Using variable costing, prepare an income statement for the first year of operations. Assume budgeted

fixed costs were equal to actual fixed costs.

B) Using absorption costing, prepare an income statement for the first year of operations. Assume

budgeted fixed costs were equal to actual fixed costs.