It is the end of 2017. Tessa All - Fixed Corporation began operations in January 2016. The company is so named because it has no variable costs. All its costs are fixed; they do not vary with output. Tessa All - Fixed Corp. is located on the bank of a river and has its own hydroelectric plant to supply power, light, and heat. The company manufactures a synthetic fertilizer from air and river water and sells its product at a price that is not expected to change. It has a small staff of employees, all paid fixed annual salaries. The output of the plant can be increased or decreased by pressing a few buttons on a keyboard. The following budgeted and actual data are for the operations of Tessa All - Fixed. (Click the icon to view the budgeted and actual data.) Read the requirements. Requirement 1. Prepare income statements with one column for 2016, one column for 2017, and one column for the two years together using (a) variable costing and (b) absorption costing. (Use parentheses or a minus sign for an operating loss.) Start by preparing the (a) variable costing income statement for 2016, 2017, and the two year total. Revenue Fixed costs: $ 2016 2,640,000 $ 2017 Total 2,640,000 $ 5,280,000 Manufacturing costs Operating costs Total fixed costs Operating income (loss) 2,100,000 2,100,000 4,200,000 100,000 2,200,000 440,000 $ 100,000 2,200,000 440,000 $ 200,000 4,400,000 880,000 Now prepare the (b) absorption costing income statement for 2016, 2017, and the two year total. (Enter a "0" for any $0 balances. Use parentheses or a minus sign for an operating loss. Label each variance as favorable (F) or unfavorable (U). Use units of production as the denominator level in the allocation rate.) 2016 Revenue Cost of goods sold Beginning inventory Allocated fixed manufacturing costs Deduct ending inventory Adjustment for production-volume variance Total cost of goods sold Gross margin Operating costs Operating income (loss) Data Table The company uses budgeted production as the denominator level and writes off any production-volume variance to cost of goods sold. Sales Production Selling price Costs (all fixed): 2016 30,000 tons 60,000 tons 2017a 30,000 tons 0 tons $88 per ton $88 per ton Manufacturing $2,100,000 $2,100,000 $100,000 Operating (nonmanufacturing) $100,000 (a) Management adopted the policy, effective January 1, 2017, of producing only as much product as needed to fill sales orders. During 2017, sales were the same as for 2016 and were filled entirely from inventory at the start of 2017. - X