1. Prepare an income statement under throughput costing for the year ended December 31, 2020 for Stenback Company.
2. Reconcile the difference between the contribution margin and the throughput margin for Stenback in 2020. Then reconcile the operating income between variable costing and throughput costing for Stenback in 2020.
3. Advocates of throughput costing say it provides managers less incentive to produce for inventory than either variable costing or, especially, absorption costing. Do you agree? Why or why not? Under what circumstances might you recommend that Stenback use throughput costing?

The Stenback Company uses an absorption-costing system based on standard costs. Variable manufacturing cost consists of direct material cost of $4 per unit and other variable manufacturing costs of $1.20 per unit. The standard production rate is 20 units per machine-hour. Total budgeted and actual fixed manufacturing overhead costs are $520,000. Fixed manufacturing overhead is allocated at $16 per machine-hour based on fixed manufacturing costs of $520,000, 32,500 machine-hours, which is the level Stenback uses as its denominator level.

The selling price is $13 per unit. Variable operating (nonmanufacturing) cost, which is driven by units sold, is $2 per unit. Fixed operating (nonmanufacturing) costs are $55,000. Beginning inventory in 2020 is 35,000 units; ending inventory is 45,000 units. Sales in 2020 are 575,000 units.

The same standard unit costs persisted throughout 2019 and 2020. For simplicity, assume that there are no price, spending, or efficiency variances.