The Zwatch Company manufactures trendy, high-quality, moderately priced watches. As Zwatch'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 Zwatch's 2020 income statement. The following data are for the year ended December 31, 2020: (Click the icon to view the data.) (Click the icon to view the assumptions.) Read the requirements. Requirement 1. Prepare income statements under variable and absorption costing for the year ended December 31, 2020. Begin by preparing the income statement under variable costing for the year ended December 31, 2020. Complete the top half of the income statement first, then complete the bottom portion. Variable costing Revenues 6786500 Variable cost of goods sold: Beginning inventory 403200 Variable manufacturing costs Cost of goods available for sale Deduct ending inventory Variable cost of goods sold Variable operating costs Contribution margin Fixed manufacturing overhead costs Fixed operating costs Operating income (loss) Now prepare the income statement under absorption costing for the year ended December 31, 2020. Complete the top half of the income statement first, then complete the bottom portion. (Label any variances as favorable (F) or unfavorable (U).) Absorption costing Revenues Cost of goods sold: Beginning inventory - x Data Table 84,000 units Beginning inventory, January 1, 2020 Ending inventory, December 31, 2020 2020 sales 30,000 units Selling price (to distributor) Variable manufacturing cost per unit, including direct materials Variable operating (marketing) cost per unit sold Fixed manufacturing costs Denominator-level machine-hours 277,000 units $24.50 per unit $4.80 per unit $1.60 per unit sold $1,044,000 5,800 40 units per machine-hour Standard production rate Fixed operating (marketing) costs $1,120,000 Print Done The Zwatch Company manufactures trendy, high-quality, moderately priced watches. As Zwatch'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 Zwatch's 2020 income statement. The following data are for the year ended December 31, 2020: (Click the icon to view the data.) (Click the icon to view the assumptions.) Read the requirements. Now prepare the income statement under absorption costing for the year ended December 31, 2020. Complete the top half of the income statement first, then complete the bottom portion. (Label any variances as favorable (F) or unfavorable (U).) Absorption costing Revenues Cost of goods sold: Beginning inventory Variable manufacturing costs Allocated fixed manufacturing costs Cost of goods available for sale Deduct ending inventory Adjustment for production-volume variance Cost of goods sold Gross margin Variable operating costs Fixed operating costs Operating income (loss) Requirement 2. What is Zwatch's operating income as percentage of revenues under each costing method? (Round the percentages to the nearest tenth percent, X.X%.) Operating income as % of revenues Variable costing % Absorption costing %