Comparing Net Incomes. Soneral Company started business in 1994 and had the following sales and production experiences:

The selling price was \(\$ 2\) per unit. Product costs were \(\$ 1\) per unit for all variable costs plus \(\$ 1,000\) for fixed costs. Fixed overhead was applied using 1,000 units as the expected production level each year ( \(\$ 1\) per unit). Operating expenses were the same in each year.
\section*{Required:}
Comment on each of the following:
A. Net income under variable costing is the same for 1996 and 1997.
B. Net income in 1994 is the same for both absorption costing and variable costing.
C. The total 5-year net income for absorption costing will be greater than the \(5-\) year net income for variable costing.
D. Under absorption costing, which year will show the highest profit? Why?
E. Under variable costing, which year will show the highest profit? Why?
F. Why is net income for the two methods different in 1996? Explain in dollars.

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1994 1995 1996 1997 1998 Sales (units). 1,000 1,000 1,100 1,100 1,300 Production (units) 1,000 1,500 900 1,100 1,000