On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at 100% of capacity during January. The following data summarized the results for January: 
a.Prepare an income statement using absorption costing.
b.Prepare an income statement using variable costing.
Definitions:
Permanent/Temporary
Permanent/temporary classification refers to the duration for which assets, liabilities, or policies are intended to last, with permanent being indefinite and temporary for a limited period.
Normal Balance
The expected debit or credit balance a particular account should hold under double-entry bookkeeping.
Financial Statement
A written record that conveys the business activities and financial performance of a company, including balance sheets and income statements.
Permanent/Temporary
Classification of accounts where permanent accounts refer to items on the balance sheet and temporary accounts to items that pertain to the income statement.
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