The accounting team at Sheffield is considering its options for reporting performance at the end of this year. Sheffield specializes in mylar balloons, which it sells for $0.72 each. Sheffield has used only absorption costing within its standard costing system, but management team members feel uneasy about Sheffield's most recent year's modest income (despite higher-volume sales than the previous year). They wonder if there is a different way to put the financial statements together that would provide a more consistent and perhaps conservativepresentation of performance. Some people on the accounting team have experience with variable costing, so they suggest putting together a side-by-side comparison of both costing systems for the past two years in order to compare the results. Following are the budgeted costs and budgeted production that were in place for both years, along with actual volume information for each year. Budgeted Information for Both Years Direct materials- $0.11 Per Unit Direct labor - $0.11 Per Unit Variable-MOH - $0.04 Per Unit Variable selling expense - $0.04 Per Unit Fixed-MOH - $19,232 Fixed selling and administrative expenses - $28,600 Budgeted production volume - 120,200 units

Actual Activity Year 1 Year 2 Units produced 124,800 114,900 Beginning FG Inventory (units) 2,400 10,000 Units sold 117,200 121,200

Present Sheffield's income statement for both years under absorption costing.

Present Sheffield's income statement for both years under absorption costing. The accounting team at Sheffield is considering its options for reporting performance at the end of this year. Sheffield specializes in mylar balloons, which it sells for $0.72 each. Sheffield has used only absorption costing within its standard costing system, but management team members feel uneasy about Sheffield's most recent year's modest income (despite higher-volume sales than the previous year). They wonder if there is a different way to put the financial statements together that would provide a more consistentand perhaps conservative-presentation of performance. Some people on the accounting team have experience with variable costing, so they suggest putting together a side-by-side comparison of both costing systems for the past two years in order to compare the results. Following are the budgeted costs and budgeted production that were in place for both years, along with actual volume information for each year