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: Prior Year Current Year Sales 3,100 units 6,100 units Production 4,600 units 4,600 units Production cost Factoryvariable (per unit) $ 0.60 $ 0.60 fixed $ 2,300 $ 2,300 Marketingvariable $ 0.40 $ 0.40 Administrativefixed $ 500 $ 500 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.

• 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
Less: Cost of goods sold
Available for sale
Cost of goods sold
Gross margin
Less: Selling and administrative costs
Operating income

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

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	Current Year
Change in inventory in units
x fixed overhead rate
Difference in operating income	$0	$0