Mark Company produces sporting equipment. In 2015, the first year of operations, Mark planned and produced 27,000 units and sold 16,000 units. In each year, selling price was $100, variable manufacturing costs were $40 per unit, variable selling expenses were $8 per unit, fixed manufacturing costs were $540,000, and fixed administrative expenses were $200,000.

Instructions

1. Prepare an income statement for 2015 using variable costing.
2. Prepare an income statement for 2015 using absorption costing.

3.Reconcile the differences each year in income from operations.