Gorans Grills, Inc. makes a single product - a handmade specialty barbeque grill that sells for $600. Data for last years operations follow:

Units in beginning inventory 0

Units produced 50,000

Units sold 40,000

Variable costs per unit:

Direct materials $ 120

Direct labor 130

Variable manufacturing overhead 80

Variable selling and administrative 20

Total variable cost per unit $ 350

Fixed costs:

Fixed manufacturing overhead $1,200,000

Fixed selling and administrative 600,000

Total fixed costs $1,800,000

Required:

1. Compute the unit product cost for one barbeque grill for absorption costing and variable costing.
2. Prepare an income statement for the year using the absorption costing approach.
3. Prepare an income statement for the year using the variable costing approach.
4. Explain the difference in operating income for the absorption and variable costing approaches.