Requirements: To determine Daveco Inc.'s risks and opportunities surrounding Lumb0. perform the following: 1. Using an absorption costing approach and a variable costing approach, prepare income statements for the Havana and Merlen plants at the end of 20YA and; the Banebe plant in 20XA. 2. Consider the units produced and sold for each plant (Havana and Merlen in 20YA and Banabe in 20XA) and perform a data analysis of the behavior of foxed manufacturing costs and operating income in terms of the absorption vs. variable costing approaches. 3. Write a reflection on the implications of the operating income reported for each of the plant managers using the two income statement approaches. What governance issues and opportunities do you observe based on the data? 4. For each income statement prepared in requirement 1.. compute the energy used and carbon emissions attributable to Luminxo units produced and units not sold. 5. Perform analysis of data determined in requirement 4 using data visualization tools 5. Write reflections on the impact of the accounfing method used on Daveco Inc.'s intended de-carbonization target setting. 6. Provide recommendations on strategies Daveco inc. should implement in the future. Include implications of alternative strategies. Requirement 1 Solutions: Havana Plant - 20YA The Scenario Daveco, Inc. manufactures cylindrical automotive cell batteries used in electrical vehicles (EV), under the brand name LumixO. After several years of manufacturing and selling LumixO, the company expanded operations and now has three plants named Havana, Banabe and Merlen, located across three states in the United States. In the early years of operation, Daveco relied on standard costing approaches in producing inventory, and used industry trends/benchmarks to determine how many units of Lumixo to produce. However, industry trends have become unreliable in predicting the accuracy of sales of inventory for cylindrical automotive cell batteries as many EV manufacturers have begun using prismatic cells in some of their vehicles. Also, Daveco's customers have begun tracking their carbon footprint and indicate that as part of the EV manufacturers' tracking of supplier carbon emissions under a category known as Scope 3, they would be considering whether to continue ordering Daveco's LumixO, pending yearly assessments on Daveco's demonstration of decarbonization commitment. In the production of Lumix 0 battery cells, 41.48kWh of energy per kilowatt hour of cell capacity are consumed per unit, while Daveco has also determined that 10.33kg of CO2-eq is emitted per kWh of battery cell capacity produced'. Daveco has decided to consider setting de-carbonization targets. although the company is yet to begin the process. Three years ago, the Banebe plant switched to Just in Time (JIT) production processes, a manufacturing system that produces each component of inventory only as and when needed in the production line. Last year, 20XA, Banebe produced and sold 10,000 units of LumixO, and the plant manager was rewarded with stock incentives. Towards the end of 20XA. Daveco's CEO proposed the increase of the Havana and Merlen plant managers' stock bonus incentives tied to increasing ISee Degen and Schatte (2022) Life cycle assessment of the energy consamption and GHG emissions of atate-of -the-art automotive battery eell production. 1 | Poge operating income in the coming year, 20YA. Daveco's plant managers have the discretion to choose their internal accounting methods, provided that the external accounting methods are those required by the Intemal Revenue Service (IRS). In 20YA, managers of the Havana and Merlen plant choose the absorption costing method for their internal reporting approach citing the added fees that would be incurred in paying the variable costing reporting of their internal operations, since Daveco would also need to provide the IRS an income statement using the absorption costing approach. The income statement used by the plant managers is also the data available to the CEO and shareholders. The following data comprises the data related to the production of Lumixo for both the Havana and Merlen plants at the end of 20YA, and the Banebe Plant for the 20XA year. Banebe Plant - 20XA