20x0 13-58 Absorption and Variable Costing The Twin Lakes Company had the following actual data for 20X0 and 20X1: 20x1 Units of finished goods Opening inventory 3,600 Production 17.200 13,600 Sales 13.600 15,600 Ending inventory 3,600 1,600 CHAPTER 13 566 PART 4. PRODUCT COSTING The basic production data at standard unit costs for the 2 years were as follows: Direct materials $16 Direct labor 20 Variable factory overhead Standard variable costs per unit Fixed factory overhead was budgeted at $146,000 per year. The expected volume of production was 14,600 units so the fixed overhead rate was $146,000 -14,600 = $10 per unit. Budgeted sales price was $79 per unit. Selling and administrative expenses were budgeted at variable, SII per unit sold, and fixed, 583,000 per year. Assume that there were absolutely no variances from any standard variable costs or budgeted selling prices or budgeted fixed costs in 20x0. There were no beginning or ending inventories of work in process. 1. For 20x0, prepare income statements based on standard variable (direct) costing and standard absorption costing. (The next problem deals with 20X1.) 2. Explain why operating income differs between variable costing and absorption costing. Be specific