Grills, Inc. makes a single product - a handmade specialty barbeque grill that sells for $700. Data for last years operations follow:

Units in beginning inventory 0

Units produced 50,000

Units sold 40,000

Variable costs per unit:

Direct materials $ 200

Direct labor 100

Variable manufacturing overhead 70

Variable selling and administrative 30

Total variable cost per unit $ 400

Fixed costs:

Fixed manufacturing overhead $1,500,000

Fixed selling and administrative 500,000

Total fixed costs $2,000,000

Required:

a) Compute the unit product cost for one barbeque grill for absorption costing, variable costing, and throughput costing.

b) Prepare an income statement for the year using the absorption costing approach.

c) Prepare an income statement for the year using the variable costing approach.

d) Explain the difference in operating income for the absorption and variable costing approaches.