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 (000s)	3,500	units	7,300	units
Production (000s)	5,400	units	5,400	units
Production cost
Factoryvariable (per unit)	$ 0.60		$ 0.60
fixed (000s)	$ 2,700		$ 2,700
Marketingvariable (per unit)	$ 0.40		$ 0.40
Administrativefixed (000s)	$ 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.

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

	prior year	prior year	current year	current year
sales
less: cost of goods sold
cost of production
?
?
available for sale
?
?
cost of good sold
gross margin
less selling and administrative costs
?
?
?
operating income

b.	Prepare an income statement for each year based on variable costing. same table as part A

c.

Prepare a reconciliation and explanation 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.)

	prior year	current year
change in inventory in units
multiply times fixed overhead rate
difference in operating income