Solomon Company incurred manufacturing overhead cost for the year as follows.

Direct materials	$	38.10	/unit
Direct labor	$	27.00	/unit
Manufacturing overhead
Variable	$	11.30	/unit
Fixed ($19.40/unit for 2,000 units)	$	38,800
Variable selling and administrative expenses	$	12,150
Fixed selling and administrative expenses	$	14,800

The company produced 2,000 units and sold 1,500 of them at $181.50 per unit. Assume that the production manager is paid a 2 percent bonus based on the companys net income.

Required

Prepare an income statement using absorption costing.

SOLOMON COMPANY
Income Statement
(Absorption Costing)
Cost of goods Sold

Prepare an income statement using variable costing.

SOLOMON COMPANY
Income Statement
(Variable Costing)
Variable costs

Determine the managers bonus using each approach. Which approach would you recommend for internal reporting? (Round your intermediate calculations and final answers to the nearest whole dollar amount.)

Absorption costing
Variable costing
Which approach is recommended?