Security Technology Inc. (STI) is a manufacturer of an electronic control system used in the manufacture of certain special-duty auto transmissions used primarily for police and military applications. The part sells for $63 per unit and had sales of 24,400 units in the current year, 2018. STI has no inventory on hand at the beginning of 2018 and is projecting sales of 27,200 units in 2019. STI is planning the same production level for 2019 as in 2018, 25,800 units. The variable manufacturing costs for STI are $24, and the variable selling costs are only $0.60 per unit. The fixed manufacturing costs are $180,600 per year, and the fixed selling costs are $580 per year.

Required:

1. Prepare an income statement for each year using full costing. (Round your final answers to nearest whole dollar amount.)

2. Prepare an income statement for each year using variable costing.

3. Prepare a reconciliation of the difference each year in the operating income resulting from the full and variable costing methods.

Please follow order bellow for your answers.

1. 2018 2019

sales
Less COGS
Beginning inventory
Available for sale
less: ending inventory
COGS
Gross margin
less selling and admin costs
fixed
variable

2. 2018 2019

Sales
Less: Cost of goods sold
Cost of goods produced
Beginning inventory
Available for sale
Cost of goods sold
Contribution margin
less: Selling and administrative costs
Operating income

3.

2018

2019

Change in inventory in units

Multiply times fixed overhead rate

Difference in operating income