Harrison Pumps is a division of Liverpool Controls Corporation. The division manufactures and sells a pump that is used in a wide variety of applications. During the coming year, it expects to sell 60,000 units for $30 per unit. Imran Qureshi manages the division. He is considering producing either 60,000 or 90,000 units during the period. Other information is as follows:

Instructions
(a) Prepare an absorption-costing income statement, with one column showing the results if 60,000 units are produced and one column showing the results if 90,000 units are produced.
(b) Prepare a variable-costing income statement, with one column showing the results if 60,000 units are produced and one column showing the results if 90,000 units are produced.
(c) Reconcile the difference in net income sunder the two approaches and explain what causes this difference.
(d) Discuss the usefulness of the variable-costing income statements versus the absorption-costing income statements for decision-making and for evaluating the manager's performance.

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Division Information for 2016 Beginning inventory Expected sales in units Selling price per unit Variable manufacturing cost per unit Fixed manufacturing overhead cost (total) Fixed manufacturing overhead costs per unit 60,000 $30 S12 $540,000 Based on 60,000 units Based on 90,000 units Manufacturing cost per unit Based on 60,000 units Based on 90,000 units $9 per unit ($540,00060,000) $6 per unit ($540,000 90,000) $21 per unit ($12 variable $9 fixed) $18 per unit ($12 variable + $6 fixed) $2 per unit Variable selling and administrative expenses Fixed selling and administrative expenses (total) $50,000