Variable and Absorption Costing Summarized data for the first year of operations for Gorman Products, Inc., are as follows: Sales (70,000 units) Production costs (80,000 units) Direct material Direct labor Manufacturing overhead: Variable Fixed Operating expenses: Variable $2,800,000 880,000 720,000 544,000 320,000 175,000 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 a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable. Sales Cost of Goods Sold: Absorption Costing Income Statement Beginning Inventory $ 2,800,000 Direct materials Direct labor Manufacturing overhead Less: Ending Inventory Cost of Goods Sold Gross profit $ 880,000 720,000 864,000 308,000 2,156,000 644,000 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 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 Cost of Goods Sold: Beginning Inventory Direct materials Direct labor Manufacturing overhead Less: Ending Inventory Cost of Goods Sold Gross profit Operating expenses Net Income (Loss) $ 2,800,000 $ 0 880,000 720,000 864,000 308,000 2,156,000 644,000 $ 415,000 229,000 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. Sales Variable Costing Income Statement $ 2,800,000 Variable cost of Goods Sold: Beginning Inventory $ 0 Direct materials 880,000 Direct labor 720,000 Variable manufacturing overhead 544,000 Less: Ending Inventory 268,000 Variable cost of goods sold 1,876,000 Variable operating expenses 175,000 Contribution margin 749,000