Nestl compares absorption costing and variable costing for its chocolate division. In August 2041, the following data is provided: Fixed Manufacturing Overhead: $2,000,000 Variable Manufacturing

Nestlé compares absorption costing and variable costing for its chocolate division. In August 2041, the following data is provided:

• Fixed Manufacturing Overhead: $2,000,000
• Variable Manufacturing Overhead: $1,000,000
• Direct Materials: $500,000
• Direct Labor: $700,000
• Units Produced: 100,000

Requirements:

• Prepare income statements using absorption costing.
• Prepare income statements using variable costing.
• Compare the net income under each method.
• Discuss the implications of each costing method on financial reporting.