14 Question 5 Oom Pah Pah Co. produces a single product a toy. It began operations on January 2, 2012 by building a plant with a capacity of 150,000 toys per year. It is currently preparing the 2012 year-end financial reports. The following information pertains to the production and marketing of its product. Sales price per unit Direct materials cost per unit Direct labour cost per unit Variable overhead cost per unit manufacturing Fixed manufacturing costs per unit (at 2012 production levels) Variable overhead cost per unit seling and administrative Fixed selling and administrative costs (total) S16.20 S 2.70 $5.40 $ 2.03 1.20 1.35 S74,250.00 For the year ended December 31, 2012, Oom Pah Pah produced and sold 130,000 toys. The company has a bonus plan for management based on net income Required a. Prepare, in good form, an absorption costing income statement and a variable costing income statement for the year ended December 31, 2012, assuming that the company produces and sells 130,000 units. b. Man agement has the option to report nct income either on the basis of absorption costing or variable costing. Suppose management chose to increase production to its capacity of 150,000 toys, and sales remained at 130,000 toys. Explain which method of reporting income management would likely take because of its bonus plan. Show calculations in support of your