High Tech has just released the following details relating to their latest product, a solar-powered abacus.

Cost of manufacture: $

Materials 20

Labor 8

Variable overhead 2

Fixed overhead (total) 360,000

Selling and administrative costs:

Variable 10% of sales

Fixed $ 200,000

During the first month of production, 12,000 units were produced and 10,000 were sold at $100 each. The expected capacity for production is 180,000 units per year.

Required

(a) Prepare an income statement for the month under:

• Absorption costing
• Variable costing

(b) Reconcile the two income statements.