Information for a start-up firm that is introducing a new product follows.

Production costs:

Variable ........................... $40 per unit

Fixed ..........................$10,000 per month

Selling and administration:

Variable .............................. $9 per unit

Fixed ..........................$25,000 per month

Selling price ..................... $89 per unit

Production volume ..... 1,000 units

Sales volume .................. 850 units

REQUIRED

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

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

C. Reconcile income under the two methods.