K It is the end of 2020 Gibson All-Fixed Corporation began operations in January 2019. The company is so named because it has no variable costs All its costs are fixed; they do not vary with output. Gibson 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 Gibson All-Fixed (Click the loon to view the budgeted and actual data) Read the requirements. XXXXD 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) Requirements 1. Prepare income statements with one column for 2019, one column for 2020, and one column for the 2 years together using (a) variable costing and (b) absorption costing. 2019 26,000 tons 52,000 tons 2020 26,000 tons O tons 2. What is the breakeven point under (a) variable costing and (b) absorption costing? $80 per ton $80 per ton $1,924,000 3. What inventory costs would be carried in the balance sheet on December 31, 2019 and 2020, under each method? 4. Assume that the performance of the top manager of Gibson All-Fixed is evaluated and rewarded largely on the basis of reported operating income. Which costing method would the manager prefer? Why? Manufacturing Operating (nonmanufacturing) $98,000 $1,924,000 $98,000 Management adopted the policy, effective January 1, 2020, of producing only as much product as needed to fil sales orders. During a 2020, sales were the same as for 2019 and were filled entirely from inventory at the start of 2020. Dono Print Done Requirement 1. Prepare income statements with one column for 2019, one column for 2020, and one column for the 2 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 2019, 2020, and the 2 year total Revenue Fixed costs: Manufacturing costs Operating costs Total fixed costs Operating income (loss) 2019 2020 Total Operating income (loss) Now prepare the (b) absorption costing income statement for 2019, 2020, and the 2 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.) Revenue Cost of goods sold 2019 2020 Total 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). Requirement 2. What is the breakeven point under (a) variable costing and (b) absorption costing? Start by calculating the breakeven point under (a) variable costing. (Round your answer up to the nearest unit) Breakeven point =under variable costing Now calculate the breakeven point under (b) absorption costing. Enter the formula labels and amounts needed to calculate the absorption costing breakeven sales. (Assume "P" is the production level in units Abbreviations used MOH manufacturing overhead, CM contribution margin) +1 (Round your answer up to the nearest unit.) The breakeven point under absorption costing when sales are tons is units P 11 Revenue 11- Requirement 3. What inventory costs would be carried in the balance sheet on December 31, 2019 and 2020, under each method? (For accounts with a $0 bilance, enter a $0 in the appropriate cell.) Variable costing December 31, 2019 December 31, 2020 Absorption costing (nonmanufacturing) Requirement 4. 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? Operating income is affected by both production and sales under least in the short run, is influenced by Most managers would prefer costing because their performance in any given reporting period, at