Jumbo Jet Company manufactures a product that employs expensive automated machinery in its processing. Jumbo Jet uses straight-line depreciation for this automated machinery. Because of a lag in the economy, Jumbo Jet has a large stock of Finished Goods Inventory, this constitutes a material item on the balance sheet at year-end. A departmental cost accounting system assigns production costs to the units processed each period.

The controller of the company informs you that management is considering adopting variable costing as a method of accounting for plant operations and inventory valuation for internal decision making. They understand that conventional or absorption costing must continue to be used for external purposes.
Required:
Explain the effect, if any, such a change would have on:

a. Year-end financial statements.

b. Net income for the year.