vr. SLO3: Student will be able to produce accurate and professional financial, managerial and/or other accounting reports. To measure firm performance, two methods of calculating income have been developed: variable costing and absorption costing. Answer the following questions regarding these two methods: 1. How is cost information related to external financial reporting? How are these two methods used for purposes of external or internal reporting? How does the U.S. GAAP limit the use of the two methods? 2. Among the types of manufacturing costs, which one is treated differently and how is it treated under the two methods? What are the assumptions and rationale for the differential treatment? 3. Use the following information to answer the following questions: a. Calculate the cost of goods sold for each of the two methods. b. Prepare an income statement for each of the two methods. Units in beginning inventory 10,000 Units produced Units sold ($47 per unit) 9,300 Variable costs per unit: Direct materials $6 Direct labor variable overhead Fixed costs: Fixed overhead per unit produced $5 S138,000 Fixed selling and administrative SLO3: Student will be able so analyze professional financial, managerial, and/or other accounting reports. 4. Discuss how the relationship between production and sales affects the relationship between variable-costing income and absorption-costing income. 5. Apply the numbers and reports you generate to discuss the similarities and differences between the two methods. 6. Discuss the implications and consequences of using the two methods in evaluating managers performance