Comparison of Variable and Full-Absorption Costing: Analyzing Profit Performance: Eaton's Enterprises released the following figures from its records for Year 1 and Year 2:

Required:

a. Prepare income statements for both years, using full-absorption costing.

b. Prepare income statements for both years, using variable costing.

c. Comment on the different operating profit figures.

Transcribed Image Text:

Sales units Year 1 240,000 Year 2 240,000 Production units 240,000 400,000 Selling price per unit $20 $20 Variable manufacturing cost per unit Annual fixed manufacturing cost $12 $12 $1,200,000 $1,200,000 Variable marketing and administrative costs per unit sold $1.25 $1.25 Fixed marketing and administrative costs $420,000 $420,000