PROBLEM 5-8. Variable and Full Costing Income: Comprehensive Problem The following information relates to Porter Manufacturing for fiscal 2006, the company's first year of operation:

Selling price per unit Direct material per unit Direct labor per unit Variable manufacturing overhead per unit Variable selling cost per dollar of sales Annual fixed manufacturing overhead Annual fixed selling expense Annual fixed administrative expense Units produced Units sold

$

$

$

$

120 60 20 5

$ 0.10

$2,000,000

$1,000,000

$ 800,000 200,000 170,000 Required

a. Prepare an income statement using full costing.

b. Prepare an income statement using variable costing.

c. Calculate the amount of fixed manufacturing overhead that will be included in ending inventory under full costing and reconcile it to the difference between income computed under variable and full costing.