The annual data that follow pertain to Aqua Goggles, a manufacturer of swimming goggles (the company had no beginning inventory):

Requirements:

1. Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for Aqua Goggles for the year.
2. Which statement shows the higher operating income? Why?
3. The company marketing vice president believes a new sales promotion that costs \($140,000\) would increase sales to 220,000 goggles. Should the company go ahead with the promotion? Give your reason.

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Sales price Variable manufacturing expense per unit. Sales commission expense per unit.... Fixed manufacturing overhead. Fixed operating expenses... Number of goggles produced. Number of goggles sold..... $ 45 $ 20 $ 7 $1,980,000 $ 250,000 220,000 198,000