Borunda Corporation has provided the following data forits two most recent years of operation:
| Selling price per unit | $83 |
| | |
| Manufacturing costs: | |
| Variable manufacturing cost per unitproduced: | |
| Direct materials | $9 |
| Direct labor | $7 |
| Variable manufacturing overhead | $3 |
| Fixed manufacturing overhead per year | $360,000 |
| Selling and administrative expenses: | |
| Variable selling and administrative expense per unitsold | $6 |
| Fixed selling and administrative expense peryear | $77,000 |
| | Year 1 | Year 2 |
| Units in beginning inventory | 0 | 2,000 |
| Units produced during the year | 10,000 | 12,000 |
| Units sold during the year | 8,000 | 12,000 |
| Units in ending inventory | 2,000 | 2,000 |
Required:
a. Assume the company uses absorption costing. Preparean income statement for each year.
b. Assume the company uses variable costing. Prepare anincome statement for each year.
c. Prepare a report in good form reconciling thevariable costing and absorption costing net incomes.
