The annual data that follows pertain to

ShadyShady,

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

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Requirements

1.	Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for ShadyShady 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 $135,000 would increase sales to 205,000 goggles. Should the company go ahead with the promotion? Give your reason. Sales price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $47 Variable manufacturing expense per unit. . . . $19 Sales commission expense per unit. . . . . . . . $12 Fixed manufacturing overhead. . . . . . . . . . . $1,640,000 Fixed operating expenses. . . . . . . . . . . . . . . $245,000 Number of goggles produced. . . . . . . . . . . . . . 205,000 Number of goggles sold. . . . . . . . . . . . . . . . . . 193,000 Shady Income Statement (Absorption Costing) For the Year Ended December 31 Less: Less: Operating expenses