Regina Company manufacturers a professional-grade vacuum cleaner and began operations in 2020. For 2020, Regina budgeted to produce and sell 20,000 units. The company had no price, spending, or efficiency variances and writes off production-volume variance to cost of goods sold. Actual data for 2020 are given as follows:

Required

1. Prepare a 2020 income statement for Regina Company using variable costing.
2. Prepare a 2020 income statement for Regina Company using absorption costing.
3. Explain the differences in operating incomes obtained in requirements 1 and 2.
4. Regina’s management is considering implementing a bonus for the supervisors based on gross margin under absorption costing. What incentives will this bonus plan create for the supervisors? What modifications could Regina management make to improve such a plan? Explain briefly.

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1 2 Units sold 3 4 56700 8 Home 9 10 11 12 13 Units produced Insert Selling price Variable costs: A Fixed costs: Page Layout Manufacturing cost per unit produced: Direct materials Direct manufacturing labor Manufacturing overhead Marketing cost per unit sold Manufacturing costs Administrative costs Marketing costs Formulas $ $ Data B 18,000 17,500 450 30 25 60 45 $1,200,000 965,450 1,366,400