Oak Mart, a producer of solid oak tables reports the following data from its second year of business.

1. Prepare the current-year income statement for the company using variable costing. 2. Prepare the current-year income statement for the company using absorption costing.

Oak Mart, a producer of solid oak tables, reports the following data from its second year of business. $ 330 per unit 105,000 units 108,250 units 3,250 units $ Sales price per unit Units produced this year Units sold this year Units in beginning-year inventory Beginning inventory costs Variable (3,250 units. x $140) Fixed (3,250 units X $80) Total Manufacturing costs this year Direct materials Direct labor Overhead costs this year Variable overhead Fixed overhead Selling and administrative costs this year Variable 455,000 260,000 715,000 $ $ 46 per unit 70 per unit $3,400,000 $7,200,000 $1,400,000 4,400,000 1. Prepare the current-year income statement for the company using variable costing. OAK MART COMPANY Variable Costing Income Statement Sales (Less: Variable costs Beginning inventory: Variable costs Manufacturing costs this year Direct materials Direct labor Variable overhead costs 0 Less: Ending finished goods inventory: Variable cost of goods sold Variable selling and administrative expenses Variable overhead costs Contribution margin [Less: Fixed expenses Fixed overhead costs Contribution margin Less: Fixed expenses Fixed overhead costs Fixed selling and administrative costs Fixed overhead costs 131 Net income (loss) 2. Prepare the current-year income statement for the company using absorption costing. OAK MART COMPANY Absorption Costing Income Statement Sales Less: Cost of goods sold Beginning inventory Manufacturing costs this year Direct materials Direct labor Variable overhead costs Fixed overhead costs Less: Ending inventory Cost of goods sold Gross margin Selling general and administrative expenses Variable selling and administrative expenses Fixed selling and administrative costs Fixed selling and administrative costs Net income (loss) Net income (loss) Net income under variable costing is higher than net income under absorption costing by: Fixed costs added to(subtracted from) inventory