On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at 100% of capacity during January. The following data summarized the results for January:
_____________________________________Units
Production..........................................50,000
Sales ($18 per unit) ..............................42,000
Inventory, January 31..............................8,000
Manufacturing costs:
Variable..........................................$575,000
Fixed..................................................80,000
Total...............................................$655,000
Selling and administrative expenses:
Variable..........................................$ 35,000
Fixed.................................................10,500
Total...............................................$ 45,500
(a) Prepare an income statement using absorption costing.
(b) Prepare an income statement using variable costing.