norwood company a producer of solid oak tables reports the 281841

Norwood Company, a producer of solid oak tables, reports the following data from its current year operations, which is its second year of business.

Sales price per unit . . . . . . . . . . . . . . . . . . . $320 per unit

Units produced this year . . . . . . . . . . . . . . . 115,000 units

Units sold this year . . . . . . . . . . . . . . . . . . . 118,000 units

Units in beginning year inventory . . . . . . . . 3,000 units

Beginning inventory costs

Variable (3,000 units _ $135) . . . . . . . . . . $405,000

Fixed (3,000 units _ $80) . . . . . . . . . . . . . 240,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $645,000

Production costs this year

Direct materials . . . . . . . . . . . . . . . . . . . .$40 per unit

Direct labor . . . . . . . . . . . . . . . . . . . . . . . $62 per unit

Overhead costs this year

Variable overhead . . . . . . . . . . . . . . . . . $3,220,000

Fixed overhead . . . . . . . . . . . . . . . . . . . $7,400,000

Nonproduction costs this year

Variable selling and administrative . . . . . . . $1,416,000

Fixed selling and administrative . . . . . . . . . 4,600,000

1. Prepare the current year income statement for the company using absorption costing.

2. Prepare the current year income statement for the company using variable costing.

3. Explain any difference between the two income numbers under the two costing methods in parts 1 and 2.