Variable and Absorption Costing Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows:

Sales (75,000 units)	$3,000,000
Production costs (80,000 units)
Direct material	880,000
Direct labor	720,000
Manufacturing overhead:
Variable	544,000
Fixed	320,000
Operating expenses:
Variable	168,000
Fixed	240,000
Depreciation on equipment	60,000
Real estate taxes	18,000
Personal property taxes (inventory & equipment)	28,800
Personnel department expenses	30,000

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 anet loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.

Sales	$Answer
Cost of Goods Sold:
Beginning Inventory	$Answer
Direct materials	Answer
Direct labor	Answer
AnswerGross profitOperating expensesVariable manufacturing overheadManufacturing overheadContribution margin	Answer
Less: Ending Inventory	Answer
Cost of Goods Sold	Answer
AnswerGross profitOperating expensesVariable manufacturing overheadManufacturing overheadContribution margin	Answer
AnswerGross profitOperating expensesVariable manufacturing overheadManufacturing overheadContribution margin	Answer
Net Income (Loss)	$Answer

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	$Answer
Variable cost of Goods Sold:
Beginning Inventory	$Answer
Direct materials	Answer
Direct labor	Answer
AnswerGross profitVariable manufacturing overheadManufacturing overheadVariable operating expensesContribution margin	Answer
Less: Ending Inventory	Answer
Variable cost of goods sold	Answer
AnswerGross profitVariable manufacturing overheadManufacturing overheadVariable operating expensesContribution margin	Answer
AnswerGross profitVariable manufacturing overheadManufacturing overheadVariable operating expensesContribution margin	Answer
Fixed costs:
AnswerGross profitVariable manufacturing overheadManufacturing overheadVariable operating expensesContribution margin	Answer
Operating expenses	Answer
Total Fixed Cost	Answer
Net Income (Loss)	$Answer

c. Assume that you must decide quickly whether to accept a special one-time order for 1,000 units for $30 per unit.

Which income statement presents the most relevant data?Answerabsorption costingvariable costing

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.

$Answer

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 costs.Variable costing approach because the cost should include a reasonable portion of fixed manufacturing costs.