Smart Products Inc. produces smart phones. The company has no finished goods inventory at the beginning of year 1. The following information pertains to Smart Products Inc.

Smart Products Inc. produces smart phones. The company has no finished goods inventory at the beginning of year 1. The following information pertains to Smart Products Inc. 200,000 units $400 per unit Annual production Sales price Variable production cost per unit: Direct materials Direct labor Manufacturing overhead Total variable cost per unit $120 60 80 $260 per unit Fixed production costs $400,000 each year: $2 per unit at 200,000 units of production $20 per unit $400,000 each year Variable selling and admin. cost Fixed selling and admin. costs All 200,000 units produced during year 1 are sold during year 1. Required: A. Prepare a traditional income statement assuming the company uses absorption costing. B. Prepare a contribution margin income statement assuming the company uses variable costing