1. Use the income statements on the Absorption Statement and Variable Statement to complete the following table for the original production level. Then prepare similar income statements at a production level 10,000 units higher and add that information to the table. Assume that total fixed costs, unit variable costs, unit sales price, and the sales levels are the same at both production levels.

2. What is the change in operating income from producing 10,000 additional units under absorption costing?

3. What is the change in operating income from producing 10,000 additional units under variable costing?

Income Statements:

inefficiencies. Each decision-making situation should be carefully analyzed in deciding whether absorption or variable costing reporting would be more useful. All costs are controllable in the long run by someone within a business. For a given level of management, costs may be controllable costs or noncontrollable costs. sales price, and the sales levels are the same. Complete questions (1)-(4) that follow. If the answer is zero, enter "0". 2. What is the change in operating income from producing 10,000 additional units under absorption costing? $ 3. What is the change in operating income from producing 10,000 additional units under variable costing? Absorption Statement Absorption costing does not distinguish between variable and fixed costs. All manufacturing costs are included in the cost of goods sold. Variable Statement Under variable costing, the cost of goods manufactured includes only variable manufacturing costs. This type of income statement includes a computation of manufacturing margin. Saxon, Inc. Variable Costing Income Statement For the Year Ended December 31 Sales $1,200,000 Variable cost of goods sold: Variable cost of goods manufactured $560,000 Ending inventory (112,000) Total variable cost of goods sold Manufacturing margin $752,000(448,000) Variable selling and administrative expenses Contribution margin $512,000(240,000) Fixed costs: Fixed manufacturing costs $240,000 Fixed selling and administrative expenses \begin{tabular}{r} 65,000 \\ \cline { 2 - 2 } \end{tabular} Total fixed costs Operating income $207,000(305,000) Method Comparison 4,000 . There was no beginning inventory