Given the following information:

Prior Year (Budget) Prior Year (Actual) Current Year (Budget) Current Year (Actual)

Beginning Inventory (Units) 0$ 0$ ? ?

Sales (Units) 600,000 580,000 575,000 570,000

Manufactured (Units) 600,000 590,000 640,000 610,000

Selling Price ($/Unit) 9.99 9.90 9.95 10.00

Variable Manufacturing Costs ($) 4.92 4.90 5.00 4.95

Total Fixed Manufacturing Costs ($) 1,584,000 1,561,000 1,625,000 1,599,531

Variable Selling Cost ($/Unit) 1.00 1.01 0.99 1.00

Total Fixed SG/A Costs ($) 350,000 353,000 352,850 348,000

Other information:

• The manufacturer uses FIFO
• The manufacturer uses Standard Costing

Required:

A) Construct an income statement for the Current Year based on Variable Costing.

B) Construct an income statement for the Current Year based on Absorption Costing.

C) Reconcile the difference in Net Income between Variable Costing and Absorption Costing for the current year by comparing this difference in income to the differences in ending inventory for Absorption Costing and Variable Costing.