3M compares absorption costing and variable costing for its adhesive products. In July 2042, the following data is provided:

• Fixed Manufacturing Overhead: $1,500,000
• Variable Manufacturing Overhead: $700,000
• Direct Materials: $400,000
• Direct Labor: $600,000
• Units Produced: 150,000

Requirements:

• Prepare income statements using absorption costing.
• Prepare income statements using variable costing.
• Compare the net income under each method.
• Discuss the implications of each costing method on financial reporting.