ClearAir Company began operations in 2013. The company manufacturers a professionalgrade vacuum cleaner and can make up to 24,000 units each year. Actual data for 2013 are given as follows:

Units produced	24,000
Units sold	22,500
Selling price	$416
Variable costs:
Manufacturing cost per unit produced
Direct materials	29
Direct manufacturing labor	21
Manufacturing overhead	60
Marketing cost per unit sold	43
Fixed costs:
Manufacturing costs	1,440,000
Administrative costs	946,100
Marketing	1,311,200

1.	Prepare a 2013 income statement for ClearAir Company using variable costing.
	2. Prepare a 2013 income statement for ClearAir Company using absorption costing.
3.	Explain the differences in operating incomes obtained in requirement 1 and requirement 2.
4.	ClearAir's management is considering implementing a bonus for the supervisors based on gross margin under absorption costing. What incentives will this create for the supervisors? What modifications could ClearAir management make to improve such a plan? Explain briefly.