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Exercise 19-3 Income reporting under absorption costing and variable costing LO P2 Sims Company, a manufacturer of tablet computers, began operations on January 1, 2019. Its cost and sales information for this year follows. $ $ 35 per unit 55 per unit Manufacturing costs Direct materials Direct labor Overhead costs Variable Fixed Selling and administrative costs for the year Variable Fixed Production and sales for the year Units produced Units sold Sales price per unit $ 20 per unit $8,800,000 (per year) $ 775,000 $4,750,000 110,000 units 80,000 units 360 per unit $ 1. Prepare an income statement for the year using variable costing. 2. Prepare an income statement for the year using absorption costing. Required 1 Required 2 Prepare an income statement for the year using variable costing. SIMS COMPANY Variable Costing Income Statement Sales $ 28,800,000 Less: Variable costs Direct materials Direct labor Variable overhead costs Variable selling and administrative expenses 775,000 775,000 19,225,000 Total variable costs Contribution margin Less: Fixed expenses Fixed overhead costs Fixed selling and administrative costs 8,800,000 4,750,000 Total fixed expenses Net income (loss) 13,550,000 $ 5,675,000 $28,800,000 SIMS COMPANY Absorption Costing Income Statement Sales Less: Cost of goods sold Direct materials Direct labor Variable overhead costs Fixed overhead costs Cost of goods sold Gross margin Variable selling and administrative expenses Fixed selling and administrative costs 4,750,000 775,000 Total selling, general and administrative expenses Net income (loss) 5,525,000 $ 8,075,000