Variable costing and absorption costing $,$ the Z $-$ Var Corporation $.($ R$.$ Marple $,$ adapted $)$ It is the end of $2017.$ Z $-$ Var Corporation began operations in January $2016.$ The company is so named because it has no variable costs $($ Zero VARiable $).$ All its costs are fixed ; they do not vary with output $.-$ Var Corp. is located on the bank of a river and has its own hydroelectric plant to supply power $,$ light $,$ and heat $.$ The company manufactures a synthetic fertilizer from air and river water and sells its product at a price that is not expected to change $.$ It has a small staff of employees $,$ all paid fixed annual salaries $.$ The output of the plant can be increased or decreased by pressing a few buttons on a keyboard $.$ The following budgeted and actual data are for the operations of The company uses budgeted production as the denominator level and writes off any production $-$ volume variance to cost of goods sold $.$ fZ $-$ Var $20162017$a $30,000$ tons $30,000$ tons $60,000$ tons tons Sales Production Selling price Costs $($ all fixed $)$ : Manufacturing $90$ per ton $90$ per ton $ $2,580,000$ $ $102,000$ $ $2,580,000$ $ $102,000$ Operating $($ nonmanufacturing $)$ to fill sales orders $.$ During $2017,$ sales were the same as for $2016$ and were filled entirely from inventory at Management adopted the policy $,$ effective January $1,2017,$ of producing only as much product as needed the start of $2017.$

$1.$ Prepare income statements with one column for $2016,$ one column for $2017,$ and one column for the two years together using $($ a $)$ variable costing and $($ b $)$ absorption costing $.2.$ What is the breakeven point under $($ a $)$ variable costing and $($ b $)$ absorption costing $?3.$ What inventory costs would be carried in the balance sheet on December $31,2016$ and $2017$ under each method $?4.$ Assume that the performance of the top manager of Z $-$ Var is evaluated and rewarded largely on the basis of reported operating income $.$ Which costing method would the manager prefer $?$ Why $?$