Return to question Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. The company had no beginning inventory in the prior year. These data summarize the current and prior year operations: 0.31 points Prior Year 2,600 units 3,600 units Current Year 4,600 units 3,600 units Sales Production Production cost Factory-variable (per unit) -fixed Marketing-variable Administrative-fixed $ 0.60 $1,800 $ 0.40 $ 500 $ 0.60 $1,800 $ 0.40 $ 500 Required: 1. Prepare an income statement for each year based on full costing. 2. Prepare an income statement for each year based on variable costing. 3. Prepare a reconciliation of the difference each year in the operating income resulting from using the full costing method and variable costing method. Required 1 Required 2 Required 3 ----------------- Prepare an income statement for each year based on variable costing. YALE COMPANY Variable Costing Income Statement Prior Year Current Year $ 13,800 7,800 Sales Less: Cost of goods sold Beginning inventory Cost of goods produced 0 2,160 600 2,160 Available for sale Less: Ending inventory 2,160 600 2,760 0 Cost of goods sold Add: Variable selling and administrative 1,560 2,160 2,760 2,760 X $ 6,240 $ 11,040 Contribution margin Less: Fixed manufacturing costs Less: Selling and administrative costs 1,800 500 1,800 X 500 Fixed 2,300 2,300 Operating income TALL VUIVITI Variable Costing Income Statement Prior Year $ Current Year 7,800 $ 13,800 Sales Less: Cost of goods sold Beginning inventory Cost of goods produced $ $ 0 2,160 600 2,160 2,760 Available for sale Less: Ending inventory 2,160 600 Cost of goods sold Add: Variable selling and administrative 1,560 2,160 2,760 2,760 Contribution margin $ 6,240 $ 11,040 Less: Fixed manufacturing costs Less: Selling and administrative costs 1,800 1,800 500 Fixed 500 2,300 2,300 Operating income