In the prior period, 5,000 units were produced and sold, revenue was $200,000, and fixed costs were $60,000 for manufacturing and $50,000 for selling and administration. Variable costs were $40,000 for manufacturing and $30,000 for selling and administration. In the current period, 5,000 units were produced and 4,500 were sold. No changes occurred in prices or costs between the periods.

REQUIRED

A. Using the variable costing method: (1) calculate the cost of ending inventory and (2) prepare an income statement for the current period.

B. Using the absorption costing method (1) calculate the cost of ending inventory and (2) prepare an income statement for the current period.

C. Reconcile income under the two methods.