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 $47 per unit and had sales of 24,900 units in the current year, 2015. STI has no inventory on hand at the beginning of 2015 and is projecting sales of 28,700 units in 2016. STI is planning the same production level for 2016 as in 2015, 26,800 units. The variable manufacturing costs for STI are $18 and the variable selling costs are only $0.90 per unit. The fixed manufacturing costs are $187,600 per year and the fixed selling costs are $680 per year.

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

SECURITY TECHNOLOGY INC.
Full Costing
Income Statement
	2015		2016
Sales		$1,170,300		$1,348,900
Less: Cost of goods sold
			$47,500
Available for sale
Cost of goods sold		622,500		717,500
Gross margin		$547,800		$631,400
Less selling and administrative costs
Operating income		$524,710		$604,890

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

SECURITY TECHNOLOGY INC.
Variable Costing
Income Statement
	2015		2016
Sales		$1,170,300		$1,348,900
Less: Cost of goods sold
Available for sale
Cost of goods sold
Contribution margin		$699,690		$806,470
Less selling and administrative costs
Operating income		$511,410		$618,190