Baird Company incurred manufacturing overhead cost for the year as follows.

Direct materials $ $38\mathrm{.}90/$unit

Direct labor $ $26\mathrm{.}40/$unit

Manufacturing overhead

Variable $ $11\mathrm{.}60/$unit

Fixed $($$$19\mathrm{.}00/$unit for $1,200$ units$)$ $ $22,800$

Variable selling and administrative expenses $ $5,460$

Fixed selling and administrative expenses $ $14,200$

The company produced $1,200$ units and sold $700$ of them at $$181\mathrm{.}20$ per unit. Assume that the production manager is paid a $2$ percent bonus based on the company$$s net income.

Required

Prepare an income statement using absorption costing.

Prepare an income statement using variable costing.

Determine the manager$$s bonus using each approach. Which approach would you recommend for internal reporting?