Maddie's Mats produces and sells artistic placemats for dining room tables. These placemats are manufactured out of recycled plastics. For last year, each mat had a variable manufacturing cost of $3, and fixed manufacturing overhead of $150,000. Maddie's Mats incurs no other costs. The following table summarizes the selling price and the number of mats produced and sold last year:

Last Year

Selling price $ 5.00

Variable manufacturing cost $ 3.00

Fixed manufacturing cost $ 150,000

Units produced 150,000

Units sold 100,000

Maddie's Mats uses FIFO (First-in First Out) to value its ending inventory. Last year Maddie's Mats had no beginning inventory.

Required:

a. income statement for last year using absorption costing. [7 points]

b. income statement for last year using variable costing. [6 points]