Nudie Company started operation in 2020. The company manufactures mineral salt for

swimming pools that it sells online by the box, at $50 per box. Nudie uses an actual costing

system, which means that the actual costs of direct materials, direct labour, and

manufacturing overhead are entered into the work-in-process inventory. The actual

application rate for manufacturing overhead is computed each year; actual manufacturing

overhead is divided by actual production (in units) to compute the application rate.

Information for Nudies first two years of operation is as follows:

2020

2021

Sales (in units) ...

2,500

2,500

Production (in units) ..

3,000

2,000

Production costs:

Variable manufacturing costs ..

$21,000

$14,000

Fixed manufacturing overhead .....

42,000

42,000

Selling and administrative costs:

Variable ....

25,000

25,000

Fixed ...

20,000

20,000

Nudie Company had no beginning or ending work-in-process inventories for either year.

Required:

A.

Prepare operating income statements for both years based on absorption costing.

B.

Prepare operating income statements for both years based on variable costing.

C.

Prepare a numerical reconciliation of the difference in income reported under the

two costing methods used in requirements A and B.

!!!!!Please provide working process! Thank you so much!