4. In Exhibit 4, the operating income is larger under absorption costing than under variable costing. Why? Please be very explicit in explaining the reason(s) for the difference.

5. Use the information in Exhibit 1 to identify cost drivers and compute manufacturing overhead rates for machine maintenance, machine set up labor, and material handling. Use these overhead rates to calculate the cost of goods manufactured for a pair of machine-made shoes and a pair of handmade shoes, and compute the margin percentages for each.