Current period actual costs incurred:

Direct Materials = $6/unit.

Direct Labor = $5/unit.

Variable Manufacturing Overhead = $2/unit.

Variable Marketing (i.e., sales commission) = $1/unit

Fixed Manufacturing Overhead = $80/period.

Fixed Marketing = $10/period.

Units Sold = 13, Units Produced = 10.

Assume there were enough units in beginning inventory with a product cost equal to current period product cost to help meet sales, if necessary.

Selling Price = $30/unit.

- Based on the data above, build two income statements, one using Absorption Costing and one using Variable Costing.

- If your absorption costing bottom-line figure is different from your variable costing bottom-line figure, explain the difference (identifying the amount of the difference and the accounts which are driving the difference). If your bottom-line figures are not different between the two income statements, please explain.

- Which costing method is better to use for awarding bonuses to operating managers and why?