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The annual data that follow pertain to Shady, a manufacturer of swimming goggles. (Shady had no beginning inventories.) (Click the icon to view the
The annual data that follow pertain to Shady, a manufacturer of swimming goggles. (Shady had no beginning inventories.) (Click the icon to view the data.) Requirements 1. Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for Shady for the year. 2. Which statement shows the higher operating income? Why? Reconcile the difference between the two statements. 3. Shady's marketing vice-president believes a new sales promotion that costs $190,000 would increase sales to 205,000 goggles. Should the company go ahead with the promotion? Give your reason. Shady Contribution Margin (Variable Costing) Income Statement Sales revenue Variable expenses: For the Year Ended December 31 Variable cost of goods sold: Fixed expenses: Operating Income
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