Number of goggles produced	150,000
Number of goggles sold	125,000
Sales price per unit	$39
Variable manufacturing cost per unit	10
Sales commission cost per unit	3
Fixed manufacturing overhead	1,350,000
Fixed selling and administrative costs	240,000

The 2016 data that follow pertain to Al's Awesome EyewearAl's Awesome Eyewear, a manufacturer of swimming goggles. (Al's Awesome EyewearAl's Awesome Eyewear had no beginning Finished Goods Inventory in January 2016.)

Requirement 1. Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for Al's Awesome EyewearAl's Awesome Eyewear for the year ended December 31, 2016. (Round interim calculations to the nearest cent.)Begin by preparing Al's Awesome EyewearAl's Awesome Eyewear's conventional (absorption costing) income statement for the year ended December 31, 2016.

Al's Awesome Eyewear
Income Statement (Absorption Costing)
Year Ended December 31, 2016
Operating Income

Prepare Al's Awesome EyewearAl's Awesome Eyewear's contribution margin (variable costing) income statement for the year ended December 31, 2016.

Al's Awesome Eyewear
Income Statement (Variable Costing)
Year Ended December 31, 2016
Operating Income

Requirement 2. Which statement shows the higher operating income? Why?

The

contribution margin conventional income statement shows the higher operating income. The operating income under

absorption variable costing is higher because the units sold

exceeded the units produced. was equal to the units pruduced. was less than the units produced. The difference in operating income between the two income statements is attributable to the

cost of goods sold per unit fixed costs per unit selling and administrative costs per unit variable costs per unit attached to the units

in beginning inventory. in ending inventory. sold.

Requirement 3.

Al's Awesome EyewearAl's Awesome Eyewear's marketing vice president believes a new sales promotion that costs $55,000 would increase sales ton130,000 goggles. Should the company go ahead with the promotion? Give your reasoning.The company

should not should go ahead with the promotion because the additional

sales revenue generalted from the promotion is less than contribution margin generated from the promotion is less than sales revenue generalted from the promotion exceeds contribution margin generated from the promotion exceeds the additional cost of the promotion.