The Tomlinson Company manufactures trendy, high-quality, moderately priced watches. As Tomlinson's senior financial analyst, you are asked to recommend a method of inventory costing. The chief financial officer (CFO) will use your recommendation to prepare Tomlinson's 2020 income statement. The following data are for the year ended December 31, 2020:

Beginning inventory, January 1, 2020 90,000 units

Ending inventory, December 31, 2020 34,000 units

1.	Prepare income statements under variable and absorption costing for the year ended December 31, 2020.
2.	What is Tomlinson's operating income as percentage of revenues under each costing method?
3.	Explain the difference in operating income between the two methods.
4.	Which costing method would you recommend to the CFO? Why?

2020 sales: 433,000 units

Selling price (to distributor): $24.00 per unit

Variable manufacturing cost per unit, including direct materials: $5.40 per unit

Variable operating (marketing) cost per unit sold: $1.20 per unit sold

Fixed manufacturing costs: $1,852,200

Denominator-level machine-hours: 6,300

Standard production rate: 60 units per machine-hour

Fixed operating (marketing) costs :$1,130,000