The following information has been extracted from Universal Inc.s financial records for its first year of operations:

Units produced 10,000

Beg. Finished Goods Inventory 0

Units sold 7,000

Sales Price per Unit $100

Variable costs per unit: Fixed costs for year:

Direct Materials $8 Overhead $70,000

Direct Labor 9 Marketing & Admin 30,000

Overhead 3

Selling 4 per unit sold

Required:

1. Compute the manufacturing cost of one unit using the Variable Costing method.

2. Compute the manufacturing cost of one unit using the Absorption Costing method.

3. Prepare the Income Statement under both methods.

4. Reconcile the difference in Operating Income between the 2 methods (be VERY specific and use numbers to reconcile.)