Refer to the data in exercise 23.

Units in beginning inventory .......0

Units produced ............ 20,000

Units sold ............... 18,000

Units in ending inventory ........ 2,000

Variable costs per unit:

Direct materials ............. $ 40

Direct labor .............. 20

Variable manufacturing overhead ...... 5

Variable selling and administrative .... 2

Fixed costs:

Fixed manufacturing overhead .....$250,000

Fixed S&A ...............$100,000

Required

A. Prepare income statements for each costing method.

B. Explain the difference between the two income statements.

C. If, in the next year of operation, sales exceed production by 1,000 units, what would be the net income under each costing method? Explain the difference.