Matthew Walker Ltd Variable Income Statement For the Year Ended December 31, 2020 Sales (1,500 panel @ 2,500) 3,750,000 Variable cost of goods sold: Beginning Inventory -0- Cost of goods manufactured 2,275,000 (1,750@1,300) Cost of goods available for sale 2,275,000 Less ending Inventory (250@1,300) 325,000 1,950,000 Product contribution margin 1,800,000 Less variable selling and administrative Expenses (1,500@180) 270,000 Total contribution margin 1,530,000 Less fixed expenses: Fixed factory overhead 1,500,000 Fixed selling and administrative 190,000 1,690,000 expenses Net loss (160,000) During the year, the following variable production costs per unit were recorded: direct materials, 800; direct labour, 300; and overhead, 200. Budgeted production was 1,750 units Mr Walker was upset about the net loss because he had wanted to borrow funds to extend capacity. His friend who teaches accounting at a local university suggested that the use of absorption costing could change the picture. Required: (a) Prepare an absorption costing Income statement. (b) Explain the source of the difference between the net income (loss) figures under the two costing systems. CUBA (c) Assume that during the second year of operations, Mr Walker's company produced 1,750 panels, sold 1,850, and experienced the same total fixed costs. Prepare a variable costing income statement