JetStar produces jet bridges for many domestic and international airports. Cost information for JetStar’s jet bridges is as follows:

Additional information for the first three quarters of 2020 for JetStar are shown below:

JetStar’s controller, Max, wishes to analyze the difference in the income statements between throughput costing, absorption costing, and variable costing for the first 3 quarters of 2020.

Required

Assume no beginning inventory.
1. Prepare an absorption costing income statement
2. Prepare a variable costing income statement
3. Prepare a throughput costing income statement
4. Explain the difference in the net income under each costing method.
5. Based on the information provided, which costing method do you believe JetStar is currently using to calculate the bonus for the production manager? Why?
6. If Q4 sales were 65 and Q4 actual and budgeted production was 50, what difference would you expect in Q4 income between absorption costing and variable costing? Why?

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Variable costs per jet bridge: Materials Labor Manufacturing Overhead Selling General and administrative Fixed costs for the first 3 quarters of 2020: Manufacturing Overhead Selling General and administrative $ 5,400 $ 3,200 $ 6,400 $ 1,400 $ 1,005 $849,915 allocated based on budgeted production $590,000 $895,000