Dirt Free Company manufacturers a professionalgrade vacuum cleaner and began operations in 2020.For 2020, Dirt Free budgeted to produce and sell 26,000 units. The company had no price, spending, or efficiency variances and writes off production-volume variance to cost of goods sold. Actual data for 2020 are given as follows:

Data Table

	A	B
1	Units produced	20,000
2	Units sold	19,500
3	Selling price	$422
4	Variable costs:
5	Manufacturing cost per unit produced:
6	Direct materials	$25
7	Direct manufacturing labor	28
8	Manufacturing overhead	51
9	Marketing cost per unit sold	45
10	Fixed costs:
11	Manufacturing costs	$1,326,000
12	Administrative costs	926,400
13	Marketing costs	1,479,000

Requirement 1. Prepare a 2020 income statement for Dirt Free Company using variable costing.

Complete the top half of the income statement first, then complete the bottom portion. (For amounts with a $0 balance, make sure to enter "0" in the appropriate input field.)

Variable Costing
	Revenues					$?
	Variable cost of goods sold:
		Beginning inventory			$?
		Variable manufacturing costs			?
		Cost of goods available for sale			?
		Deduct ending inventory			(?)
		Variable cost of goods sold				?
	Variable marketing costs					?
	Contribution margin					?

	Fixed manufacturing costs					?
	Fixed administrative costs					?
	Fixed marketing costs					?
	Operating income (loss)					$?

Requirement 2. Prepare a 2020 income statement for Dirt Free Company using absorption costing.

Complete the top half of the income statement first, then complete the bottom portion. (For amounts with a $0 balance, make sure to enter "0" in the appropriate input field. Label any variances as favorable (F) or unfavorable (U).)

Absorption Costing
	Revenues						$?
	Cost of goods sold:
		Beginning inventory			$?
		Variable manufacturing costs			?
		Allocated fixed manufacturing costs			?
		Cost of goods available for sale			?
		Deduct ending inventory			(?)
		Adjustment for production-volume variance			?	U
		Cost of goods sold					?
	Gross margin						?

	Variable marketing costs						?
	Fixed administrative costs						?
	Fixed marketing costs						?
	Operating income (loss)						$?

Requirement 3. Explain the differences in operating incomes obtained in requirements 1 and 2.

The difference in operating income under absorption costing and variable costing is __________ .