Absorption vs. Variable Costing Brindle Arts uses Variable Costing for internal purposes, but uses Absorption Costing for their financial reports. The following information is for Quarters 3 and 4, 2022. Calculate unit product costs for Quarters 3 and 4 for Variable and Absorption Costing. Prepare an income statement for each method, then show why there is a difference between the two. Abs vs Var out of 20 points Selling price per unit $ 205 Quarter 3 Quarter 4 Variable costs per unit Units in beginning inventory 1,500 Direct materials $ 75.00 Production (in units) 12,000 12,500 Direct labor $ 25.00 Sales (in units) 10,500 14,000 Variable overhead $ 20.00 Ending inventory 1,500 Variable S&A $ 15.00 Fixed Costs in total per quarter Fixed manufacturing overhead Fixed selling & administrative $450,000 $450,000 Variable Costing Compute the unit product costs for Quarters 3 and 4 Show the difference between variable costing NOI and absorption costing NOI. Quarter 3 Quarter 4 Quarter 3 Quarter 4 Variable unit product cost Prepare an income statement for Quarters 3 and 4 Sales Variable expenses: Variable COGS Variable S&A Total variable expenses Contribution Margin Fixed expenses: Fixed MOH Fixed S&A Total fixed expenses Net Operating Income Quarter 3 Quarter 4 Absorption Costing Compute the unit product costs for Quarters 3 and 4 Quarter 3 Quarter 4 Absorption unit product cost Prepare an income statement for Quarters 3 and 4 Sales COGS Gross Margin S&A Expenses Net Operating Income Quarter 3 Quarter 4 Units in beginning inventory +units produced -units sold = units in ending inventory FOH costs in ending inventory -FOH in beg. inv. = FOH deferred in inventory or released from inventory Variable NOI Add/less: FOH deferred/released in inventory Absorption costing NOI Select: Select: