Yale Company manufactures hair brushes that sell at wholesale for $3 per unit. The company had no beginning inventory in the prior year.

These data summarize the current and prior year operations:

Required
1. Prepare an income statement for each year based on full costing.
2. Prepare an income statement for each year based on variable costing.
3. Prepare a reconciliation and explanation of the difference each year in the operating income resulting from using the full-costing method and variable-costing method.

Transcribed Image Text:

Prior Year Current Year Sales Production Production cost 1,800 units 2,200 units 2,000 units 2,000 units Factory-variable (per unit) $0.60 $0.60 -fixed $1,000 $.40 $500 $.40 Administrative-fixed $500