The Tieton Company Uses Absorption Costing for External Reporting Purposes

The Tieton Company uses absorption costing for external reporting purposes. During the last 2 years the per-unit production costs have remained constant. The volume variance is closed to cost of goods sold at the end of each year. During Year 1, production exceeded sales by 1,000 units. The income statements follow:
Year 1 Year 2
Sales ($50 per unit)$450,000 $775,000
Cost of goods sold:
Direct materials 45,000 77,500
Direct labour 90,000 155,000
Variable overhead 72,000 124,000
Fixed overhead 36,000 62,000
Volume variance adjustment 50,000 30,000
Total cost of goods sold 293,000 448,500
Gross margin 157,000 326,500
Selling and Administration:
Variable 10,000 17,000
Fixed 50,000 50,000
Total selling and administration 60,000 67,000
Operating income $ 97,000 $259,500
a)Prepare the income statements using variable costing, and reconcile them with the absorption statements.
b)Prepare the income statements using throughput costing, and reconcile them to the variable statements prepared in part (a).