1. Jordan Company produced and sold 35,000 units during its first year of operations at $20 per unit. Coincidentally, the company chose 35,000 units to compute its pre-determined overhead rate. Costs for the first year of operations are as follows:

Direct materials	$210,000
Direct labor	60,000
Expected and actual variable overhead	105,000
Expected and actual fixed overhead	120,000
Actual variable SG&A expenses	90,000
Actual fixed SG&A expenses	75,000

1. Prepare an absorption costing income statement that includes total gross margin and operating profit (loss).
2. Prepare a variable costing income statement that includes total contribution margin and operating profit (loss).
3. Which method would be used to report the cost of goods sold to external parties. Why?