Mary Smith has been trying to convince her boss, James Johnson, to use variable costing for internal reporting purposes. If we could predict demand better, it wouldnt be an issue, argued Mary. James doesnt think it is worth the extra effort or confusion of maintaining two sets of books. As a last resort, Mary has prepared income statements under five different scenarios of production volume. She believes that if this doesnt convince James that their current income statements have been misleading, nothing will. The following table shows the inventory unit data under five scenarios. Each scenario should be considered independently.

		Scenario
		A			B			C			D			E
Beginning inventory		200			200			200			200			200
Production		500			600			700			800			900
Sales		(700)			(700)			(700)			(700)			(700)
Ending inventory		0			100			200			300			400

Mary gathered the following information from the accounting records. Fixed manufacturing costs per unit were determined based on normal production of 700 units per year. The 200 units in beginning inventory are valued at $56.60.

Sales price per unit		$	101.00
Variable manufacturing costs per unit		$	22.00
Fixed manufacturing costs per unit		$	43.20
Total fixed manufacturing costs		$	30,240
Total selling expense (all fixed)		$	24,650

(a) Complete the following table. Scenario A is completed for you as a guide. (Round per unit answers to 2 decimal places, e.g. 15.25 and all other revenues and costs to 0 decimal places, e.g. 5,275.)

			Scenario
		A				B		C		D		E
Product cost per unit
Variable cost			$22.00			$22.00		$22.00		$22.00		$22.00
Fixed cost			60.48			enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Total unit cost			$82.48			$enter a total unit cost in dollars		$enter a total unit cost in dollars		$enter a total unit cost in dollars		$enter a total unit cost in dollars
Income StatementAbsorption Costing
Sales			$70,700			$enter a dollar amount		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
Cost of goods sold
Units in beginning inventory			(11,320)			enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Units sold from current year production			(41,240)			enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Total cost of goods sold			(52,560)			enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Gross margin			18,140			enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Selling expense			(24,650)			enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Operating income			$(6,510)			$enter the operating income in dollars		$enter the operating income in dollars		$enter the operating income in dollars		$enter the operating income in dollars
Income StatementVariable Costing
Sales			$70,700			$enter a dollar amount		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
Variable costs			(15,400)			enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Contribution margin			55,300			enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Fixed manufacturing expenses			(30,240)			enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Fixed selling expenses			(24,650)			enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Operating income			$410			$enter the operating income in dollars		$enter the operating income in dollars