Variable and Absorption Costing b. Prepare an income statement based on variable costing. Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are Only use a negative sign with your answer for net income (loss), if the answer as follows: represents a net loss. Otherwise, do not use negative signs with any answers. Round Sales (75,000 units) $3,000,000 answers to the nearest whole number, when applicable. Production costs (80,000 units) Variable Costing Income Statement Direct material 880,000 Sales $ 3,000,000 Direct labor 720,000 Variable cost of Goods Sold: Manufacturing overhead: Beginning Inventory $ OV Variable 544,000 Direct materials 880,000 Fixed 320,000 Direct labor 720,000 Operating expenses: Variable manufacturing overhead + 544,000 Variable 168,000 Less: Ending Inventory 134,000 Fixed 240,000 Variable cost of goods sold 2,010,000 Depreciation on equipment 60,000 Variable operating expenses 168,000 Real estate taxes 18,000 Contribution margin 822,000 Personal property taxes (inventory & equipment) 28,800 Fixed costs: Personnel department expenses 30,000 Manufacturing overhead 320,000 v Operating expenses 240,000 a. Prepare an income statement based on full absorption costing. Total Fixed Cost 560,000 Only use a negative sign with your answer for net income (loss), if the answer Net Income (Loss) $ 262,000 represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable. c. Assume that you must decide quickly whether to accept a special one-time order for 1,000 units for $30 per unit. Absorption Costing Income Statement Which income statement presents the most relevant data? variable costing Sales $ 3,000,000 Cost of Goods Sold: Determine the apparent profit or loss on the special order based solely on these data. Use a negative sign with your answer if the special order creates an apparent loss. Round answer to the nearest whole number. Beginning Inventory $ 0 960 Direct materials 880,000 Direct labor 720,000 d. If the ending inventory is destroyed by fire, which costing approach would you use as a basis for filing an insurance claim for the fire loss? Why? Manufacturing overhead 864,000 Select the most appropriate statement. Less: Ending Inventory 154,000 OAbsorption costing approach because the cost should include a reasonable portion of fixed manufacturing costs. Cost of Goods Sold 2,310,000 OVariable costing approach because the cost should include a reasonable portion of fixed manufacturing costs. Gross profit 690,000 Operating expenses 403,000 Net Income (Loss) $ 282,000