Given the following information:

	Prior Year (Budget)	Prior Year (Actual)	Current Year (Budget)	Current Year (Actual)
Beginning Inventory (Units)	0	0	?	?
Sales (Units)	610,000	570,000	582,000	590,000
Manufactured (Units)	600,000	590,000	640,000	610,000
Selling Price ($/unit)	9.99	9.90	9.95	10.10
Variable Manufacturing Cost ($/unit)	4.93	4.93	4.96	4.96
Total Fixed Manufacturing Costs ($)	1,584,000	1,561,000	1,664,000	1,599,531
Variable Selling Cost ($/unit)	1.00	1.02	0.99	1.01
Total Fixed SG&A Costs ($)	360,000	363,000	356,850	348,000

Other information:

The manufacturer uses FIFO (this is to make is easier to solve weighted average would be a lot more difficult to solve)

The manufacturer uses Standard Costing

Required:

a) Prepare an income statement for the Current Year based on Variable Costing.

b) Prepare an income statement for the Current Year based on Absorption Costing.

c) Prepare a T-account that for Fixed Manufacturing Overhead based on Absorption costing that shows: actual costs, applied costs, rate variance and production volume variance (hint: this account should be at zero at year-end)

d) Reconcile the difference in Net Income between Variable Costing and Absorption Costing for the current year. (hint: compare this difference in income to the differences in ending inventory for Absorption Costing and Variable Costing).