The Gable Company manufactures trendy, high-quality moderately priced watches. As Gable's senior financial analyst, you are asked to recommend a method of inventory costing. The CFO will use your recommendation to prepare Gable's 2014 income statement. The following data are for the year ended December 31, 2014:

Beginning inventory, January 1, 2014	89,000	units
Ending inventory, December 31, 2014	34,000	units
2014 sales	429,000	units
Selling price (to distributor)	$23.00	per unit
Variable manufacturing cost per unit, including direct materials	$5.60	per unit
Variable operating (marketing) cost per unit sold	$1.80	per unit sold
Fixed manufacturing costs	$1,996,800
Denominator-level machine-hours	6,400
Standard production rate	60	units per machine-hour
Fixed operating (marketing) costs	$1,130,000

Assume standard costs per unit are the same for units in beginning inventory and units produced during the year. Also, assume no price, spending, or efficiency variances. Any production-volume variance is written off to cost of goods sold in the month in which it occurs.

Requirement 1. Prepare income statements under variable and absorption costing for the year ended December 31, 2014. Begin by preparing the income statement under variable costing for the year ended December 31, 2014.

Complete the top half of the income statement first, then complete the bottom portion.

Variable costing
Revenues
Variable cost of goods sold:
	Beginning inventory
	Variable manufacturing costs
	Cost of goods available for sale
	Deduct ending inventory		(1996800)
	Variable cost of goods sold
Variable operating costs
Contribution margin