Problem

Stuart Glass Company makes stained glass lamps. Each lamp that it sells for $315.00 per lamp requires $16.50 of direct materials and $70.50 of direct labor. Fixed overhead costs are expected to be $199,500 per year. Stuart Glass expects to sell 1,000 lamps during the coming year. Selling and administrative expenses were zero.

Required

Prepare income statements using absorption costing, assuming that Stuart Glass makes 1,000, 1,250, and 1,500 lamps during the year.

Prepare income statements using variable costing, assuming that Stuart Glass makes 1,000, 1,250, and 1,500 lamps during the year.