Sims Company, a manufacturer of tablet computers, began operations on January 1, 2017. Its cost and sales information for this year follows.

Manufacturing costs
Direct materials	$	35	per unit
Direct labor	$	55	per unit
Overhead costs for the year
Variable overhead	$	4,000,000
Fixed overhead	$	6,000,000
Selling and administrative costs for the year
Variable	$	750,000
Fixed	$	4,750,000
Production and sales for the year
Units produced		100,000	units
Units sold		70,000	units
Sales price per unit	$	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. 3. Under what circumstance(s) is reported income identical under both absorption costing and variable costing?

SIMS COMPANY
Variable Costing Income Statement
Sales
Less: Variable costs
Direct materials
Direct labor
Variable overhead
Variable selling and administrative expenses
Total variable costs
Contribution margin
Less: Fixed expenses
Fixed selling and administrative costs
Fixed overhead
Net income (loss)

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
Selling general and administrative expenses
Fixed selling and administrative costs
Variable selling and administrative expenses
Net income (loss)