Data tableThe Baxta Company manufactures$$ trendy, high$-$quality, moderately priced watches. As Baxta$\text{'}$s senior financial$$ analyst, you are asked to recommend a method of inventory costing. The chief financial officer$($CFO$)$ will use your recommendation to prepare Baxta$\text{'}$s $2020$ income statement. The following data are for the year ended December$31,2020$:

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Part $1$

Requirement $1.$ Prepare income statements under variable and absorption costing for the year ended December$31,2020.$

Begin by preparing the income statement under variable costing for the year ended December$31,2020.$ Complete the top half of the income statement$$ first, then complete the bottom portion.

Part $2$

Variable costing

Revenues

$$5,801,500$

Variable cost of goods sold:

Variable manufacturing costs

$$1,089,600$

Beginning inventory

$417,600$

Cost of goods available for sale

$1,507,200$

Deduct ending inventory

$(148,800)$

Variable cost of goods sold

$1,358,400$

Variable operating costs

$367,900$

Contribution margin

$4,075,200$

Fixed manufacturing overhead costs

$1,185,600$

Fixed operating costs

$1,070,000$

Operating income $($loss$)$

$$1,819,600$

Part $3$

Now prepare the income statement under absorption costing for the year ended December$31,2020.$ Complete the top half of the income statement$$ first, then complete the bottom portion. $($Label any variances as favorable$($F$)$ or unfavorable$($U$).)$

Absorption costing