Coca-Cola Company provides the following data for the production and sale of 10,000 units:
•Sales: $300,000
•Direct materials: $100,000
•Direct labor: $50,000
•Variable manufacturing overhead: $30,000
•Fixed manufacturing overhead: $60,000
•Variable selling and administrative expenses: $20,000
•Fixed selling and administrative expenses: $40,000
Required:
1.Prepare an income statement using absorption costing.
2.Calculate the gross profit and operating income.
3.Discuss the impact of absorption costing on financial reporting.