Skinny Dippers, Inc., produces nonfat frozen yogurt which it sells to restaurants and ice cream shops. The product is sold in 10-gallon containers, which have the following price and variable costs.

Sales price	$	50
Direct material		18
Direct labor		12
Variable overhead		12

Budgeted fixed overhead in 20x4, the companys first year of operations, was $400,000. Actual production was 200,000 10-gallon containers, of which 190,000 were sold. Skinny Dippers, Inc. incurred the following selling and administrative expenses.

Fixed	$	400,000	for the year
Variable	$	2	per container sold

Required:

1.	Compute the per unit product cost per container of frozen yogurt under variable costing and absorption costing.

2.	Prepare operating income statements for the year 20x4 using:

a.	Absorption costing.

b.	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.