Allerdyce Corporation Ltd. (ACL) prepares external financial statements using absorption costing and internal financial statements using variable costing. You have the following information for the operations of ACL for the past two years:

Instructions
(a) Prepare absorption-costing income statements for the years ended December 31, 2011, and 2012. Include a column for totals for the two years.
(b) Prepare variable-costing income statements for the years ended December 31, 2011, and 2012. Include a column for totals for the two years.
(c) Reconcile the year-to-year differences in net income under the absorption-costing and variable-costing methods?

Sales in units(@ $35 per unit) Production in units Variable production costs per unit Fixed production costs Fixed marketing costs Beginning inventory 2011 25,000 30,000 $ 20 $120,000 50,000 2012 35,000 30,000 $ 20 $120,000 50,000 0