how alternative choiccs impact income. Additionally, since executives use income statement to evaluate performance, managers need to know how their decisions will effect reported income. There are different ways to organize income statement information. Some income statements track xed and variable costs using the contribution margin approach, whereas others adopt the absorption approach used in reporting to external parties. Example 1: Cordell produces and sells 1,000,000 units of seat covers for seats on airplanes, buses, and railroad passenger cars. Cordell sells these to companies such as US Airways and the Grand Canyon Railway Company. The total manufacturing cost of making 1,000,000 seat covers is $30,000,000. The unit manufacturing cost of the product is $30,000,000 + 1,000,000, or $30 per unit. We will assume the Cordell Company has directmaterials costs of $14 million and direct-labor costs of $6 million, indirect manufacturing costs as illustrated in Exhibit 52, selling and Adm. Expenses as illustrated in Exhibit 5-3, and no beginning or ending inventories. Total sales are predicted at $40 million. 3|Dage