LANDAU COMPANY Exhibit 1. Income Statements and Selected Balance Sheet Items June and July June July Full Variable Full Variable Costing Costing Costing Costing Sales Revenue $865.428 $865,428 $931,710 $931,710 Cost of sales at standard 484.640 337,51 521,758 363.367 Standard gross margin $380.788 $527,911 $409.952 $568.343 Production cost variances" Labor (16259) (16,259) (11,814) (11,814) Material 12.416 12.416 8,972 8.972 Overhead volume 1,730 63,779 Overhead spending 3,604 3,604 2,832 2.832 Actual gross margin $382,27 $527,672 $346,163 $568,333 Fixed production overhead 192,883 192,883 Selling and administrative 301,250 301,250 310.351 310,351 Income before taxes $81,029 $33,539 $35,812 565,099 *Parenthesis denotes unfavorable (debit) variance. Impact on Inventories and Retained Earning The only asset account affected by the difference in accounting method was Inventories; on the liabilities and owners equity side, only Retained Earning was affected. (There was no tax liability impact since variable costing was not permitted for income tax reporting purpose.) As of 30-June As of 31-Jul Full Costing Variable Full Costing Variable Costing Costing Inventories $1,680,291 $1,170,203 $1,583,817 $1, 103,016 Retained Earnings $3,112,980 $2,602,892 $3,131,602 $2,650,801