Fairchild produces jet bridges for many domestic and international airports. Cost information for Fairchild's jet bridges is as follows: (Click the icon to view the cost information.) Additional information for the first three quarters of 2020 for Fairchild are shown below: (Click the icon to view the additional information for the first three quarters.) Fairchild's controller, Nick, wishes to analyze the difference in the income statements between throughput costing, absorption costing, and variable costing for the first 3 quarters of 2020. Assume no beginning inventory. Read the requirements. Throughput Costing: Revenues Direct materials cost of goods sold: Beginning inventory Direct materials Cost of goods available for sale Deduct ending inventory Direct materials cost of goods sold Throughput margin Manufacturing costs (other than DM) Total SG&A costs Quarter 1 Quarter 2 Quarter 3 1,995,000 2,170,000 2,030,000 835,700 931,600 268,400 299,200 904,200 Requirements 1. Prepare an absorption costing income statement 2. Prepare a variable costing income statement 3. Prepare a throughput costing income statement 4. Explain the difference in the net income under each costing method. 5. Based on the information provided, which costing method do you believe Fairchild is currently using to calculate the bonus for the production manager? Why? 6. If Q4 sales were 68 and Q4 actual and budgeted production was 54, what difference would you expect in Q4 income between absorption costing and variable costing? Why? Print Done Net income (loss) Requirement 4. Explain the difference in the net income under each costing method. The costing method aborbs the most costs into inventory, followed by the between the three quarters, the costing method, with the costing method absorbing the least amount of costs into inventory. As a result, based on our scenario here where ending costing method results in the highest amount of net income, followed by the costing method, with the costing method resulting in the lowest amount of net inventory is income for each of the three quarters. Requirement 5. Based on the information provided, which costing method do you believe Fairchild is currently using to calculate the bonus for the production manager? Why? costing method to calculate the bonus for the production manager because inventory is costs absorbed into inventory, thus providing the managers with a higher bonus. Based on the information provided, Fairchild is likely using the increase net income by the amount of each quarter with no credible reason. Using costing will Requirement 6. If Q4 sales were 68 and Q4 actual and budgeted production was 54, what difference would you expect in Q4 income between absorption costing and variable costing? Why? If Q4 sales are 68 and Q4 production is 54, ending inventory would At a fixed manufacturing cost per unit of calculated with absorption costing to be by units. we would expect net income than variable costing.