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

	Required:
a.	Prepare an income statement using absorption costing.*
b.	Prepare an income statement using variable costing.*
	*Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. You will not need to enter colons (:) on the financial statements. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. Expenses should be positive.

Labels and Amount Descriptions Labels Fixed costs For the Month Ended January 31 Amount Descriptions Contribution margin Cost of goods manufactured Ending inventory Fixed manufacturing costs Fixed selling and administrative expenses Gross profit Manufacturing margin Operating income Sales Selling and administrative expenses Total cost of goods sold Variable cost of goods manufactured Total fixed costs Total variable cost of goods sold Variable selling and administrative expenses a. Prepare an income statement using absorption costing. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. Expenses should be positive. Townsend Co. Score: 12/63 Absorption Costing Income Statement For the Month Ended January 31 1 Sales $756,000.00 2 Cost of goods sold: Variable cost of goods manufactured $575,000.00 Fixed manufacturing costs 80,000.00 Cost of goods manufactured 655,000.00 6 Variable selling and administrative expenses $35,000.00 Fixed selling and administrative expenses 10,500.00 Points: 2.86 / 15 b. Prepare an income statement using variable costing. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. You will not need to enter colons (:) on the financial statements. Enter amounts as positive numbers unless the amount is a calculation that results in a negative amount. For example: Net loss should be negative. Expenses should be positive. Question not attempted. Townsend Co. Score: 0/105 Variable Costing Income Statement (Label) 2 Variable cost of goods sold: 9 (Label)