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:

Prior Year Current Year
Sales 1,800 units 2,200 units
Production 2,000 units 2,000 units
Production cost
Factory—variable (per unit) $ 0.60 $ 0.60
—fixed $ 1,000 $ 1,000
Marketing—variable $ 0.40 $ 0.40
Administrative—fixed $ 500 $ 500

Required:

a. Prepare an income statement for each year based on full costing.

prior year prior year current year current year
sales $5400 $6600
less: cost of goods sold
cost of production
?
?
available for sale
?
?
cost of good sold
gross margin
less selling and administrative costs
?
?
?
operating income

b. Prepare an income statement for each year based on variable costing.

same table as part A

c. 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. (Negative amounts should be indicated by a minus sign.)

prior year current year
change in inventory in units
multiply times fixed overhead rate
difference in operating income