using direct costing. 4. Direct costing Income statement. The Prakash Company is comparing its present absorption costing practices with direct costing methods. An examination of its records produced the follow ing information: Maximum plant capacity Normal capacity..... Fixed factory overhead. Fixed marketing and administrative expenses.. Sales price per unit....... Standard variable manufacturing cost per unit... Variable marketing expense per unit sold. For the year, the following data are available: Budgeted production............. Actual production....... Sales... Finished goods Inventory, January 1, Unfavorable variances from standerd variable manufactur- ing costs...... 40.000 units 36.000 $54.000 20.000 10 4 1 36.000 units 30.000 28.000 1,000 $ 5.000 All variances are written off directly at year-end as an adjustment to Cost of Goods Sold. Required: (1) Direct costing income statement. (2) Operating income if absorption costing had been used. (CGAA adapted) costing va direct costing. On January 2, the 20.000 unit