intingLab Problems 8 Variable costing and absorption costing, the All-Fixed Company. (R. Marple, adapted) itis the 9-28 Variable co he company is so named becaus of 2013. The All-Fixed Company began operations in January 2012. T no variable costs. All its costs are fixed; they do not vary with output nt to supply sells annual The All-Fixed Company is located on the bank of a river and has its own hydroelectric pl power, light and heat. The company manufactures a synthetic fertilizer from air and river water its product at a price that is not expected to change Il staff of employees, all paid fixed salaries. The output of the plant can be increased or decreased by adjusting a few dials on a control panel The following budgeted and actual data are for the operations of the All-Fixed Company. All Fixed uses bud geted produc uon as tre denominator ievel and writes off eny ereduction-volume variance to cost of goods sold 2013 10,000 tons Sales Production Selling price Costs (all fixed): 20,0 S 30 pes 30 per ton 0 tons $280,000 40,000 $280,000 Manufacturing Operating (nonmanufacturing) Management adopted the policy, effective January 1, 2013, of producing only as much product as 40,000 needed to fill sales orders. During 2013, sales were the same as for 2012 and were filled entirely from inventory at the start of 2013 1. Prepare income statements with one column for 2012, one column for 2013, and one column for the two years together using (a) variable costing and (b) absorption costing What is the breakeven point under (a) variable costing and (b) absorption costing? What inventory costs would be carried in the balance sheet on December 31, 2012 and 2013, under each method? Assume that the performance of the top manager of the company is evaluated and rewarded largely on the basis of reported operating income. Which costing method would the manager prefer? Why 2. 3. 4