Regina Company manufacturers a professional-grade vacuum cleaner and began operations in 2017. For 2017, Regina budgeted to produce and sell 20,000 units. The company had no price, spending, or efficiency variances and writes off production-volume variance to cost of goods sold. Actual data for 2017 are given as follows:

1. Prepare a 2017 income statement for Regina Company using variable costing.
2. Prepare a 2017 income statement for Regina Company using absorption costing.
3. Explain the differences in operating incomes obtained in requirements 1 and 2.
4. Regina’s management is considering implementing a bonus for the supervisors based on gross margin under absorption costing. What incentives will this bonus plan create for the supervisors? What modifications could Regina management make to improve such a plan? Explain briefly.

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Home Insert 1 Units produced 2 Units sold 3 Selling price 4 Variable costs: Page Layout Formulas Date A B 18,000 17,500 $ 450 56 Manufacturing cost per unit produced Direct materials 7 Direct manufacturing labor 8 Manufacturing overhead 9 Marketing cost per unit sold $ 30 25 60 45 10 Fixed costs: 11 Manufacturing costs $1,200,000 12 Administrative costs 965,450 13 Marketing 1,366,400