Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. The company had no beginning inventory in the prior year. These data summarize the current and prior year operations:

Required:

1. Prepare an income statement for each year based on full costing.

2. Prepare an income statement for each year based on variable costing.

3. Prepare a reconciliation of the difference each year in the operating income resulting from using the full costing method and variable costing method.

Prior Year 3,200 units 4,800 units Current Year 6,400 units 4,800 units Sales Production Production cost Factory-variable (per unit) -fixed Marketing-variable Administrative-fixed $ 0.60 $ 2,400 $ 0.40 $ 500 $ 0.60 $ 2,400 $ 0.40 $ 500 Required 1 Required 2 Required 3 Prepare an income statement for each year based on full costing. YALE COMPANY Full Costing Income Statement Prior Year Current Year Sales Less: Cost of goods sold | Beginning inventory Cost of goods produced Ending inventory Available for sale Cost of goods sold Gross margin Less: Selling and administrative costs Variable Fixed Operating income Required 1 Required 2 > Required i Required 2 Required 3 Prepare an income statement for each year based on variable costing. YALE COMPANY Variable Costing Income Statement Prior Year Current Year Less: Cost of goods sold Available for sale Cost of goods sold Contribution margin Less: Selling and administrative costs Operating income Required 1 Required 2 Required 3 Prepare a reconciliation of the difference each year in the operating income resulting from using the full costing method and variable costing method. (Negative amounts should be indicated by a minus sign. Round your "Fixed overhead rate" answers to 2 decimal places.) YALE COMPANY Reconciling Difference in Operating Income Between Full and Variable Costing Prior Year Change in inventory in units x fixed overhead rate Difference in operating income Current Year