PROBLEM 5-16. Variable and Full Costing Income: Comprehensive Problem [LO 1, 2] The following information relates to Dorian Industrial for fiscal 2017, the companys first year of operation:

Units produced 420,000

Units sold 400,000

Selling price per unit $50

Direct material per unit $15

Direct labor per unit $5

Variable manufacturing overhead per unit $2

Variable selling cost per unit $0.20

Annual fixed manufacturing overhead $1,260,000

Annual fixed selling expense $300,000

Annual fixed administrative expense $100,000

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.