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 $55 per unit and had sales of 24,000 units in the current year, 2018. STI has no inventory on hand at the beginning of 2018 and is projecting sales of 26.000 units in 2019. STI IS planning the same production level for 2019 as in 2018, 25.000 units. The variable manufacturing costs for STI are $16, and the variable selling costs are only $0.50 per unit. The fixed manufacturing costs are $200,000 per year, and the fixed selling costs are $500 per year Required: 1. Prepare an income statement for each year using full costing. 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. SECURITY TECHNOLOGY INC. Full Costing Income Statement 2018 2019 $ 1,320,000 $ 1,430,000 Sales Less: Cost of goods sold Beginning inventory Cost of goods produced $ 0 $ 24,000 600,000 0 Available for sale 600,000 624,000 24,000 0 576,000 744,000 624,000 806,000 $ $ Less: Ending inventory Cost of goods sold Gross margin Less: Selling and administrative costs Variable Fixed 12,000 500 13,000 500 12,500 731,500 13,500 792,500 Operating income $ $ Required 1 Required 2 > SECURITY TECHNOLOGY INC. Variable Costing Income Statement 2018 2019 $ $ 1,320,000 1,430,000 Less: Cost of goods sold Beginning inventory Cost of goods produced $ 0 400,000 400,000 Available for sale Cost of goods sold 384,000 416,000 12,000 13,000 Contribution margin $ 924,000 $ 1,001,000 200,000 200,000 Less: Fixed manufacturing costs Less: Selling and administrative costs Fixed 500 500 200,500 723,500 200,500 800,500 Operating income $ $