1. On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at 100% of capacity during January. The following data summarized the results for January:

   		Units
   Production		50,000
   Sales ($18 per unit)		42,000
   Inventory, January 31		8,000
   Manufacturing costs:
   Variable		$575,000
   Fixed		80,000
   Total		$655,000
   Selling and administrative expenses:
   Variable		$35,000
   Fixed		10,500
   Total		$45,500

   a. Prepare an income statement using absorption costing.

   Townsend Co.
   Absorption Costing Income Statement
   For Month Ended January 31, 20--
   Cost of goods manufactured Interest revenues Less inventory, January 31, 20-- Sales Variable selling and administrative expense		$
   Cost of goods sold:
   Advertising expenses Cost of goods manufactured Cost of goods sold Gross profit Less selling and administrative expenses	$
   Advertising Expenses Cost of goods sold Gross profit Less inventory, January 31, 20-- Less selling and administrative expenses
   Advertising Expenses Cost of goods manufactured Cost of goods sold Less inventory, January 31, 20-- Variable selling and administrative expense
   Advertising Expenses Cost of goods manufactured Gross profit Less inventory, January 31, 20-- Variable selling and administrative expense		$
   Advertising Expenses Cost of goods manufactured Less inventory, January 31, 20-- Less selling and administrative expenses Variable selling and administrative expense
   Income from operations		$

   b. Prepare an income statement using variable costing.

   Townsend Co.
   Variable Costing Income Statement
   For Month Ended January 31, 20--
   Fixed manufacturing costs Less inventory, January 31, 20-- Sales Variable cost of goods manufactured Wages expense		$
   Variable cost of goods sold:
   Contribution margin Manufacturing margin Variable cost of goods manufactured Variable cost of goods sold Utilities expense	$
   Contribution margin Less inventory, January 31, 20-- Manufacturing margin Variable cost of goods sold Utilities expense
   Fixed manufacturing costs Less inventory, January 31, 20-- Variable cost of goods manufactured Variable cost of goods sold Utilities expense
   Fixed manufacturing costs Less inventory, January 31, 20-- Manufacturing margin Variable cost of goods manufactured Wages expense		$
   Fixed manufacturing costs Less inventory, January 31, 20-- Variable cost of goods manufactured Variable selling and administrative expense Wages expense
   Contribution margin Fixed manufacturing costs Less inventory, January 31, 20-- Variable cost of goods manufactured Wages expense		$
   Fixed costs:
   Contribution margin Fixed manufacturing costs Manufacturing margin Variable cost of goods sold Wages expense	$
   Contribution margin Fixed selling and administrative expenses Manufacturing margin Variable cost of goods sold Wages expense
   Income from operations		$