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:

1. Prepare an income statement for each year based on absorption costing. 2. Prepare an income statement for each year based on variable costing. 3. Prepare a reconciliation and explanation of the difference each year in the operating income resulting from using the absorption costing method and variable costing method.

Data Current Year 2,200 units Prior year 1,800 units $3.00 2,000 units $3.00 2,000 units Sales volume Selling price per unit Production volume Production cost: Factory-variable (per unit) -fixed Marketing-variable Administrative-fixed Beginning inventory $0.60 per unit $1,000 $0.40 per unit $500 0 units $0.60 per unit $1,000 $0.40 per unit $500