The annual data that follows pertain to

Sea Down There

a manufacturer of swimming goggles (the company had no beginning inventory):

sales Price $ 49

Variable Manufacturing expense per unit $22

sales commission expense per unit $ 11

fixed Manufacturing overhead $2760000

fixed operating expenses $245000

number of goggles produced $ 230000

number og goggles sold $ 215000

Requirements

1.	Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for Sea Down There

for the year.
2.	Which statement shows the higher operating income? Why?
3.	The company marketing vice president believes a new sales promotion that costs $ 150 comma 000

would increase sales to

230 comma 000

goggles. Should the company go ahead with the promotion? Give your reason.

Requirement 1. Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for

Sea Down There

for the year. Begin with the conventional (absorption costing) income statement.

Sea Down There
Income Statement (Absorption Costing)
For the Year Ended December 31
Sales revenue		$10,535,000
Less:	Cost of goods sold	7,310,000
Gross profit		3,225,000
Less:	Operating expenses	2,610,000
Operating income		$615,000

Now let's prepare the contribution margin (variable costing) income statement for

Sea Down There

for the year.

Sea Down There
Contribution Margin (Variable Costing) Income Statement
For the Year Ended December 31
Sales revenue		$10,535,000
Less:	Variable expenses
	Variable operating expenses	$2,365,000
	Variable cost of goods sold	4,730,000
Contribution margin		3,440,000
Less:	Fixed expenses
	Fixed manufacturing overhead	2,760,000
	Fixed operating expenses	245,000
Operating income		$435,000

Requirement 2. Which statement shows the higher operating income? Why?

Absorption costing operating income is			higher than	variable costing operating income. This is because absorption costing
defers $	180,000	of fixed manufacturing overhead as an asset in ending inventory. In contrast, variable costing expenses
all of	the fixed manufacturing overhead during the year.

Variable costing expenses $			more	costs during the year, so variable costing operating income is $
less	than absorption costing income the year.

Choose from any list or enter any number in the input fields and then click Check Answer.

please help with the variable costing expenses and the rest of the problem .