Problem 2 (20 marks) Taylor Co. manufactures T-shirts. During its first year of business, the company incurred the following costs: Variable cost per T-shirt Direct Materials $8.2 Direct labor 3.5 Variable manufacturing overhead 2.8 Variable selling & administrative expenses 0.7 Fixed cost per month Fixed manufacturing overhead Fixed selling and administrative expenses $21,500 10,500 Taylor Co. charges $60 for each T-shirt that it sells. During the first month of operation, it made 4,300 T-shirts and sold 4,050. Required: 1. Assuming Taylor Co. uses variable costing, calculate the variable manufacturing cost per unit for last month. 2. Prepare a variable costing income statement for last month and calculate Taylor Co.'s degree of operating leverage. 3. Assuming Taylor Co. uses full absorption costing, calculate the full manufacturing cost per unit for last month. 4. Prepare a full absorption costing income statement. 5. Suppose next month Taylor Co. expects to produce 4,200 T-shirts and sell 4,400. Without any calculations, explain whether variable or full absorption costing will show a higher income