The following information relates to Porter manufacturing for fiscal 2011, the company’s first year of operation.

Selling Price Per unit $150
Direct material per unit $75
Direct labor per unit $30
Variable manufacturing overhead per unit $5
Variable selling cost per dollar of sales $0.05
Annual fixed manufacturing overhead $2,750,000
Annual fixed selling expense $1,500,000
Annual fixed administrative expense $900,000
Units produced 250,000
Units sold 230,000

Required:

A) Prepare an income statement using full costing.

B) Prepare an income statement using variable costing.

C) Calculate the amount of fixed manufacturing overhead that will be included in ending inventory under full costing and reconcile it to the difference between incomes computed under variable and full costing.