Practice Quiz Varriable Costing Assume the following information Sales 12,000 Units Variable Cost/L $ 8.00 Production Scenario 1 12,000 Units Fixed Mfg. Cost $ 240,000 Scenario 2 48,000 Units Selling & Admir $ 20,000 Selling Price/unit $ 18.00 (75% Variable) Scenario 1 Scenario 2 1. Prepare an income statement for both scenarios under the Absorption method of costing: Sales COGS Gross Profit Selling & Admin Exp. Inc. from Operations 2. Prepare an income statement for both scenarios under the Variable method of costing: Sales Variable Mfg. Mfg Margin Variable S&A Contribution Margin Fixed Mfg Fixed S&A Inc. from Operations Please answer the following: 1. Why is there a difference in Absorption and Variable costing in the scenarios 2. Which cost structure is driven by production? Which is driven by sales? 3. Do you see the potential to manipulate earnings? What will be the long tern