Campbell Manufacturing Company (CMC) was started when it acquired 580,000 by issuing como stock. During the first year of operations, the company incurred specifically identifiable product costs (materials, labor, and overhead) amounting to $75,000. CMC also incurred $60,000 of engineering design and planning costs. There was a debate regarding how the design and planning costs should be classified Advocates of Option I believe that the costs should be classified as general, selling and administrative costs. Advocates of Option 2 believe it is more appropriate to classify the design and planning costs as product costs. During the year, CMC made 5.000 units of product and sold 4.000 mmits at price of $15 coch. All transactions were cash transactions Required a. Prepare a GAAP based income statement and balance sheet under each of the two options b. Identify the option that results in financial statements that are more likely to leave a favorable impression on investors and creditors c. Assume that CMC provides an incentive bons to the company president equal to 20 percent of net income. Compute the amount of the bonusinder each of the two options. Identify the option that provides the president with the higher bons d. Assume 30 percent income tax rate Determine the amount of income tax expense under each of the two options Identify the option that minimizes the amount of the company income tax expense e. Comment on the conflict of interest between the company president as determined in Request and the owners of the company as indicated in Regnieniet d. Describe an incentive compensation plan that would avoid a contlict of M BUHVEL, IELUVE OSS. Vocates of Uption z believe it is more appropriate to classify the design and planning costs as product costs. During the year, CMC made 5,000 units of product and sold 4,000 units at a price of $35 each. All transactions were cash transactions. Required a. Prepare a GAAP based income statement and balance sheet under each of the two options. b. Identify the option that results in financial statements that are more likely to leave a favorable impression on investors and creditors. c. Assume that CMC provides an incentive bonus to the company president equal to 20 percent of net income. Compute the amount of the bonus under each of the two options. Identify the option that provides the president with the higher bonus. d. Assume a 30 percent income tax rate. Determine the amount of income tax expense under each of the two options. Identify the option that minimizes the amount of the company's income tax expense. e. Comment on the conflict of interest between the company president as determined in Requiremente and the owners of the company as indicated in Requirement d. Describe an incentive compensation plan that would avoid a conflict of interest between the president and the owners LO 1-6