Reference no: EM132885944

Question - Security Technology Inc. (STI) is a manufacturer of an electronic control system used in the manufacture of certain special-duty auto transmissions used primarily for police and military applications. The part sells for $41 per unit and had sales of 24,600 units in the current year, 2018. STI has no inventory on hand at the beginning of 2018 and is projecting sales of 27,800 units in 2019. STI is planning the same production level for 2019 as in 2018, 26,200 units. The variable manufacturing costs for STI are $12, and the variable selling costs are only $0.30 per unit. The fixed manufacturing costs are $157,200 per year, and the fixed selling costs are $620 per year.

Required -

1. Create an income statement for each year using full costing.

2. Create an income statement for each year using variable costing.

3. Create a reconciliation of the difference each year in the operating income resulting from the full and variable costing methods.