Sisters Company manufactures and sells one product. The following information pertains to each of the companys first three years of operations:

Variable costs per unit:

Manufacturing:

Direct Materials $ 18

Direct Labor $ 12

Variable manufacturing overhead $5

Variable Selling and Administrative $4

Fixed costs per year:

Fixed manufacturing overhead $820,000

Fixed selling and administrative expenses $300,000

Selling price of the companys product is $60 per unit.

Year 1 Year 2

Units in beginning Inventory 0 5000

Units produced during the year	65,000	55,000
Units sold during the year	60,000	60,000
Units in ending inventory	5000	0

Required:

1.Assume the company uses absorption costing:

a.Compute the unit product cost for Year 1 & 2.

b.Prepare an income statement for Year 1 & 2.

2.Assume the company uses Variable costing:

a.Compute the unit product cost for Year 1 & 2.

b.Prepare an income statement for Year 1 & 2.