Great Outdoze Company manufactures sleeping bags, which sell for $65 each. The variable costs of production are as follows:

Direct material	$	20
Direct labor		11
Variable manufacturing overhead		8

Budgeted fixed overhead in 20x1 was $200,000 and budgeted production was 25,000 sleeping bags. The years actual production was 25,000 units, of which 22,000 were sold. Variable selling and administrative costs were $1 per unit sold; fixed selling and administrative costs were $30,000.

Required:

1. Calculate the product cost per sleeping bag under (a) absorption costing and (b) variable costing.

2-a. Prepare operating income statements for the year using absorption costing.

2-b. Prepare operating income statements for the year using variable costing.

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