Powell Company produces a single product. Its income statement under absorption costing for its first two years of operation follow.

		2010		2011
Sales ($48 per unit)	$	1,056,000	$	2,016,000
Cost of goods sold ($33 per unit)		726,000		1,386,000
Gross margin		330,000		630,000
Selling and administrative expenses		278,500		313,500
Net income	$	51,500	$	316,500

Additional Information
a.	Sales and production data for these first two years follow.

	2010	2011
Units produced	32,000	32,000
Units sold	22,000	42,000

b.	Variable cost per unit and total fixed costs are unchanged during 2010 and 2011. The company's $33 per unit product cost consists of the following.

Direct materials	$	5
Direct labor		8
Variable overhead		10
Fixed overhead ($320,000/32,000 units)		10
Total product cost per unit	$	33

c.	Selling and administrative expenses consist of the following.

		2010		2011
Variable selling and administrative ($1.75 per unit)	$	38,500	$	73,500
Fixed selling and administrative		240,000		240,000
Total selling and administrative	$	278,500	$	313,500

1.	Prepare income statements for the company for each of its first two years under variable costing. (Input all amounts as positive values except net loss which should be indicated with a minus sign. Omit the "$" sign in your response.)

POWELL COMPANY Variable Costing Income Statements
	2010	2011
	$	$
Variable expenses
Total variable costs
Fixed expenses
Total fixed expenses
Net income/(loss)	$	$

2.	What are the difference between the absorption costing income and the variable costing income for these two years. (Negative amounts should be indicated by a minus sign. Omit the "$" sign in your response.)

POWELL COMPANY Reconciliation of Variable Costing Income to Absorption Costing Income
	2010	2011
Variable costing income	$	$
Fixed overhead in ending inventory
Fixed overhead in beginning inventory
Absorption costing income	$	$