P7-3B. Variable And Absorption CostingService Company Rockys Automotive specializes in per-

forming automobile safety checks. After the companys first year of operations, its accountant pre-

pared the following summarized data report for the safety checks for 2016:

Sales (7,000 safety checks) .................................$700,000

Production costs (7,010 safety checks):

Direct labor ............................................490,700

Shop overhead:

Variable ...............................................112,160

Fixed .................................................70,100

Operating expenses:

Variable ...............................................21,030

Fixed .................................................16,000

Required

a. Prepare an income statement based on full absorption costing.

b. Prepare an income statement based on variable costing.

c. Assume that you must decide quickly whether to accept a special one-time order for 20 safety

checks on local police cars for $80 per safety check. Determine the apparent profit or loss on the

special order based solely on these data.