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3) TrueBeat's management will need to produce 4,000 units in Years 2 and 3 (to meet relevant range) and 6,000 units in Year 4. However,

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3) TrueBeat's management will need to produce 4,000 units in Years 2 and 3 (to meet relevant range) and 6,000 units in Year 4. However, they anticipate selling only 3,000 units in Year 2 but 5,000 units in Years 3 and 6,000 units in Year 4. They will have to carry inventory produced in Year 2 until it is sold in Year 3. Note: Net Operating Income, or NOI, for this course is essentially Income before interest or tax expense and represents the operationally controlled components of Net Income. a) Using variable costing and contribution margin income statement format, prepare predictive income statements for Years 2, 3 and 4 below. TrueBeat Income Statement (Variable Costing) For Years ending December 31 Year 2 Year 3 Year 4 Sales revenue Variable production costs Variable S&A expenses Contribution Margin Fixed Overhead Fixed S&A expenses Net Operating Income b) Using absorption costing, prepare an absorption costing income statements for TrueBeat for Years 2, 3 and 4. TrueBeat Income Statement (Absorption Costing) For Years ending December 31 Year 2 Year 3 Year 4 Sales revenue Cost of Goods Sold Gross Margin S&A expenses Net Operating Income c) Do you think TrueBeat's decision to maintain drum sets inventory from year 2 until they are sold in year 3 was a good decision? Use complete sentences and 30 to 50 words in your

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