Income statements. (SMA) Mass Company manufactures and sells a single product. The denominator level is 30,000 output units per year. Mass Company's accounting records pro- duce variable costing information, and year-end adjustments are made to produce external reports showing absorption-costing information. The following data cover the two latest years of operations:

All variances are insignificant and thus are charged to cost of goods sold.
REQUIRED 1. Prepare two income statements for 2010, one under variable costing and one under absorption costing.
2. Explain briefly why the operating income figures computed in requirement 1 agree or do not agree. ;
3. Give two advantages and two disadvantages of using variable costing for internal reporting.LO1

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Unit data: Sales Beginning inventory Ending inventory Selling price per unit Cost data: 2009 2010 25,000 25,000 2,000 2,000 2,000 6,000 $ 48 48 Standard fixed costs Manufacturing overhead $120,000 $120,000 Marketing and administrative $190,000 $190,000