Requirements:

1. Compute the net income for each month using variable costing.
2. Compute the monthly breakeven point under variable costing.
3. Explain to Ms. Gale why profits have moved erratically over the three month period shown in the absorption costing statements above and why profits have not been more closely rated to changes in sales volume.
4. Identify and discuss the advantages and disadvantages of using the variable costing method for internal reporting purposes.
5. Reconcile the absorption costing and the variable costing net operating income figures for each month.