Variable and Absorption Costing Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows: Sales (75,000 units) $4,500,000 Production costs (80,000 units) Direct material 1,320,000 Direct labor 1,080,000 Manufacturing overhead: Variable 816,000 Fixed 480,000 Operating expenses: Variable 252,000 Fixed 360,000 Depreciation on equipment 90,000 Real estate taxes 27,000 Personal property taxes (inventory & equipment) 43,200 Personnel department expenses 45,000a. 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 $ 4,500,000 Cost of Goods Sold: Beginning Inventory $ 0 Direct materials 1,320,000 Direct labor 1,080,000 Manufacturing overhead 1,296,000 Less: Ending Inventory 231,000 Cost of Goods Sold 3,465,000 Gross profit 1,035,000 Operating expenses 612,000 Net Income (Loss) $ 423,000 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. Variable Costing Income Statement Sales $ 4,500,000 Variable cost of Goods Sold: Beginning Inventory $ 0 Direct materials 1,320,000 Direct labor 1,080,000 Variable manufacturing overhead + 816,000 Less: Ending Inventory 201,000 variable cost of goods sold 3,015,000 Variable operating expenses 252,000 Contribution margin 1,233,000 Fixed costs: Manufacturing overhead 480,000 Operating expenses 360,000 Total Fixed Cost 840,000 Net Income (Loss) 393,000c. Assume that you must decide quickly whether to accept a special one-time order for 1,000 units for $45 per unit. Which income statement presents the most relevant data? |variable 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. $ 1,440 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