The following information was drawn from the records of Shelby Company:
Variable costs (per unit) ______________________Fixed costs (in total)
Direct materials.................... $12............... Manufacturing overhead............ $24,000
Direct labor........................... 9................ Selling and administrative........... 26,000
Manufacturing overhead............3
Selling and administrative..........7
During the most recent month, Shelby produced 4,000 units of product and sold 3,800 units of product at a sales price of $54 per unit.
Required
a. Prepare an income statement for the month using absorption costing.
b. Prepare an income statement for the month using variable costing.
c. Explain why a company might use one type of income statement for external reporting and a different type for internal reporting.