Addison, Inc. makes a single product, an indoor fireplace, and has provided data from last year of operations. The Controller has asked you to compare income statements if the company used the variable costing approach vs. the absorption costing report. Use the information included in the Excel Simulation and the Excel functions described below to complete the task.

1 Addison, Inc. makes a single product, an indoor fireplace. Data for last year is as follows: $420 3 Selling price per fireplace 4 Manufacturing costs 5 Variable per unit produced $135 $43 537 $210,000 6 Direct materials 7 Direct labor 8 Variable manufacturing overhead 9 Fixed manufacturing overhead per year 10 Selling and administrative expenses: 11 Variable per unit sold 12 Fixed per year 13 14 Units in beginning inventory 15 Units produced during the year 16 Units sold during the year 17 18 Use the data to answer the following 19 20 1. Assume the company uses variable costing: 21 22 Compute the unit product cost for one fireplace 23 $45 $190,000 0 5,000 4,500 24 Prepare a contribution margin income statement for the year 25 27 iVariable expenses 28 i Variable cost of goods sold 29 Variable selling and administrative expenses 30 Contribution margin 31 Fixed expenses 32 i Fixed manufacturing overhead 33 Fixed selling and administrative expenses 4 Net operating income 35 36 Compute the number of fireplaces required to breakeven 37 38 2. Assume the company uses absorption costing: 39 40 Compute the unit product cost for one fireplace 41 42 Prepare an income statement for the year 43 44 ISales 45 iCost of goods sold 46 Gross margin 47 Selling and administrative expenses 48 Net operating income