Skinny Dippers Inc. produces nonfat frozen yogurt. The product is sold in ten-gallon containers, which have the following price and variable costs.

Sales price $ 52 Direct material 19 Direct labor 12 Variable overhead 12 Budgeted fixed overhead in 20x1, the companys first year of operations, was $270,000. Actual production was 90,000 ten-gallon containers, of which 85,500 were sold. Skinny Dippers Inc. incurred the following selling and administrative expenses.

Fixed $ 90,000 for the year Variable $ 3 per container sold

1. Compute the product cost per container of frozen yogurt under (a) variable costing and (b) absorption costing.

2-a. Prepare an operating income statement for 20x1 using absorption costing.

2-b. Prepare an operating income statement for 20x1 using variable costing.

3. Reconcile the operating income reported under the two methods by listing the two key places where the income statements differ.

4. Reconcile the operating income reported under the two methods using the shortcut method.