(CLP, DOL, MS—two quarters, comprehensive) Presented below is information pertaining to the first and second quarters of 1998 operations of the Greg Company:

Additional information:
■ There were no finished goods at January 1, 1998.
* Greg writes off any quarterly underapplied or overapplied overhead as an adjustment of Cost of Goods Sold.

■ Greg’s income tax rate is 35 percent.

a. Prepare an absorption costing income statement for each quarter.

b. Prepare a variable costing income statement for each quarter.

c. Calculate each of the following for 1998, if 130,000 units were produced and sold: 1. Unit contribution margin 2. Contribution margin ratio 3. Total contribution margin 4. Net income 5. Degree of operating leverage 6. Annual break-even unit sales volume 7. Annual break-even dollar sales volume 8. Annual margin of safety as a percentage LO1

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QUARTER FIRST SECOND Units: Production 35,000 30,000 Sales 30,000 35,000 Expected activity level 32,500 32,500 Unit selling price $75.00 $75.00 Unit variable costs: Direct material 34.50 34.50 Direct labor 16.50 16.50 Factory overhead 7.80 7.80 Operating expenses 5.70 5.70 Quarterly fixed costs: Factory overhead $97,500.00 $97,500.00 Operating expenses 21,400.00 21,400.00