Variable and Absorption Costing Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows: Sales (75,000 units) $6,000,000 Production costs (80,000 units) - Direct material Direct labor Manufacturing overhead: - Variable Fixed Operating expenses: - Variable Fixed Depreciation on equipment Real estate taxes Personal property taxes (inventory 8: equipment) Personnel department expenses a. Prepare an income statement based on full absorption costing. Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable. Absorption Costing Income Statement Sales $ 6000000 V Cost of Goods Sold: Beginning Inventory $ 0 V Direct materials 1760000 V Directlabor 1440000 V Manufacturing overhead 3 V 1728000 V Less: Ending Inventory 1072000 x Cost of Goods Sold 4928000 x Operating expenses 3 x 1089600 x Gross profit x 1072000 x Net Income (Loss) 15 -'| 7600 x b. Prepare an income statement based on variable costing. Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable. Sales $ 6000000 V Variable cost of Goods Sold: Beginning Inventory $ 0 v Direct materials 1760000 v Direct labor 1440000 V Variable manufacturing overhead 1088000 v Less: Ending Inventory 0 x Variable cost of goods sold 4624000 x Contribution margin x 1376000 x Variable operating expenses 3 x 0 x Fixed costs: Manufacturing overhead 640000 v Operating expenses 0 at Total Fixed Cost 480000 x Net Income (Loss) $ 100000 x c. Assume that you must decide quickly whether to accept a special onetime order for 1,000 units for $60 per unit. A Which income statement presents the most relevant data? variable costing v v 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. $Ex 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? Select the most appropriate statement. Absorption costing approach because the cost should include a reasonable portion of fixed manufacturing costsv OVariable costing approach because the cost should include a reasonable portion of fixed manufacturing costs