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:

NOT SURE IF ITS CORRECT PLEASE HELP ME

	Prior Year		Current Year
Sales (000s)	1,800	units	2,200	units
Production (000s)	2,000	units	2,000	units
Production cost
Factoryvariable (per unit)	$ 0.60		$ 0.60
fixed (000s)	$ 1,000		$ 1,000
Marketingvariable (per unit)	$ 0.40		$ 0.40
Administrativefixed (000s)	$ 500		$ 500

Required:

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

YALE COMPANY
Full Costing
Income Statement
	Prior Year		Current Year
Sales		$5,400		$6,600
Less: Cost of goods sold
Beginning inventory	0		220
Cost of goods produced	2,200		2,200
Available for sale	2,200		2,420
Less: Ending inventory	(200)		0
Cost of goods sold		1,980		2,420
Gross margin		$3,420		$4,180
Less: Selling and administrative costs
Variable	720		880
Fixed	500		500
		1,220		1,380
Operating income		$2,200		$2,800

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

YALE COMPANY
Variable Costing
Income Statement
	Prior Year		Current Year
Sales		$5,400		$6,600
Less: Cost of goods sold
Beginning inventory	$0		$120
Cost of goods produced	1,200		1,200
Available for sale	1,200		1,320
Less: Ending inventory	(120)		0
Cost of goods sold	1,080		1,320
		720		880
Contribution margin		$3,600		$4,400
Less: Selling and administrative costs
Operating income		$2,100		$2,900

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

YALE COMPANY
Reconciling Difference in Operating Income Between Full and Variable Costing
	Prior Year	Current Year
Change in inventory in units	200	(200)
x fixed overhead rate	$0.50	$0.50
Difference in operating income	$100	$(100)