The following information relates to Dorian Industrial for fiscal 2011, the company’s first year of operation:
Units produced ............... 420,000
Units sold.................. 400,000
Selling price per unit............. $ 50
Direct material per unit............ $ 15
Direct labor per unit............. $ 5
Variable manufacturing overhead per unit... $ 2
Variable selling cost per unit.......... $ 0.20
Annual fixed manufacturing overhead..... $1,260,000
Annual fixed selling expense......... ... $ 300,000
Annual fixed administrative expense...... $ 100,000

Required
a. Prepare an income statement using full costing.
b. Prepare an income statement using variable costing.
c. Calculate the amount of fixed manufacturing overhead that will be included in ending inventory under full costing and reconcile it to the difference between income computed under variable and full costing.