The company uses budgeted production as the denominator level and writes off any production-volume variance to cost of goods sold. 2020 27,000 tons 0 tons $125 per ton Sales Production Selling price Costs (all fixed): 2019 27,000 tons 54,000 tons $125 per ton $2,700,000 $103,000 $2,700,000 $103,000 Manufacturing Operating (nonmanufacturing) Management adopted the policy, effective January 1, 2020, of producing only as much product as needed to fill sales orders. During 2020, sales were the same as for 2019 and were filled entirely from inventory at the start of 2020. It is the end of 2020. Evergreen All - Fixed Corporation began operations in January 2019. The company is so named because it has no variable costs. All its costs are fixed; they do not vary with output. Evergreen All - Fixed Corp. is located on the bank of a river and has its own hydroelectric plant to supply power, light, and heat. The company manufactures a synthetic fertilizer from air and river water and sells its product at a price that is not expected to change. It has a small staff of employees, all paid fixed annual salaries. The output of the plant can be increased or decreased by pressing a few buttons on a keyboard. The following budgeted and actual data are for the operations of Evergreen All - Fixed. (Click the icon to view the budgeted and actual data.) Requirement 1. Prepare income statements with one column for 2019, one column for 2020, and one column for the 2 years together using (a) variable costing and (b) absorption costing. (Use parentheses or a minus sign for an operating loss.) Start by preparing the (a) variable costing income statement for 2019, 2020, and the 2 year total. Total Revenue Fixed costs: Manufacturing costs Operating costs Total fixed costs Operating income (loss) 2019 ... 2020 It is the end of 2020. Evergreen All - Fixed Corporation began operations in January 2019. The company is so named because it has no variable costs. All its costs are fixed; they do not vary with output. Evergreen All - Fixed Corp. is located on the bank of a river and has its own hydroelectric plant to supply power, light, and heat. The company manufactures a synthetic fertilizer from air and river water and sells its product at a price that is not expected to change. It has a small staff of employees, all paid fixed annual salaries. The output of the plant can be increased or decreased by pressing a few buttons on a keyboard. The following budgeted and actual data are for the operations of Evergreen All - Fixed. (Click the icon to view the budgeted and actual data.) Now prepare the (b) absorption costing income statement for 2019, 2020, and the 2 year total. (Enter a "0" for any $0 balances. Use parentheses or a minus sign for an operating loss. Label each variance as favorable (F) or unfavorable (U). Use units of production as the denominator level in the allocation rate.) Revenue Cost of goods sold Beginning inventory Allocated fixed manufacturing costs Deduct ending inventory Adjustment for production-volume variance Total cost of goods sold Gross margin Operating costs Operating income (loss) 2019 2020 ... Total Requirement 2. What is the breakeven point under (a) variable costing and (b) absorption costing? Start by calculating the breakeven point under (a) variable costing. (Round your answer up to the nearest unit.) Now calculate the breakeven point under (b) absorption costing. Enter the formula labels and amounts needed to calculate the absorption costing breakeven sales. (Assume "P" is the production level in units. Abbreviations used: MOH = manufacturing overhead, CM = contribution margin.) + [ (Round your answer up to the nearest unit.) Breakeven point under variable costing The breakeven point under absorption costing when sales are tons is P units. )]= )]= Revenue Requirement 3. What inventory costs would be carried in the balance sheet on December 31, 2019 and 2020, under each method? (For accounts with a $0 balance, enter a $0 in the appropriate cell.) December 31, 2019 December 31, 2020 Variable costing Absorption costing (nonmanufacturing) Requirement 4. Assume that the performance of the top manager of the company is evaluated and rewarded largely on the basis of reported operating income. Which costing method would the manager prefer? Why? Operating income is affected by both production and sales under short run, is influenced by Most managers would prefer costing because their performance in any given reporting period, at least in the