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Part $1$

The annual data that follows pertain to Shady$,$ a manufacturer of swimming goggles$($the company had no beginning$$ inventory$)$:

LOADING...$($Click the icon to view the$$ data.$)$

Read the requirementsLOADING....

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Part $1$

Requirement $1.$ Prepare both conventional$($absorption costing$)$ and contribution margin$($variable costing$)$ income statements for Shady for the year. Begin with the conventional$($absorption costing$)$ income statement.

Shady

Income Statement $($Absorption Costing$)$

For the Year Ended December $31$

Sales revenue

$$9,264,000$

Less:

Cost of goods sold

$5,211,000$

Gross profit

$4,053,000$

Less:

Operating expenses

$2,185,000$

Operating income

$$1,868,000$

Part $2$

Now$$ let's prepare the contribution margin$($variable costing$)$ income statement for Shady for the year.

Shady

Contribution Margin $($Variable Costing$)$ Income Statement

For the Year Ended December $31$

Sales revenue

Less:

Variable expenses

$$

Less:The annual data that follows pertain to Shady, a manufacturer of swimming goggles $($the company had no beginning inventory$)$:

$($Click the icon to view the data.$)$

Read the requirements.

Requirement $1.$ Prepare both conventional $($absorption costing$)$ and contribution margin $($variable costing$)$ income statements for Shady for the year. Begin with the conventional $($absorption costing$)$ income statement.

Shady

Income Statement $($Absorption Costing$)$

For the Year Ended December $31$

Now let's prepare the contribution margin $($variable costing$)$ income statement for Shady for the year.

Shady

Contribution Margin $($Variable Costing$)$ Income Statement

For the Year Ended December $31$

Requirements

Data table

Prepare both conventional $($absorption costing$)$ and contribution

margin $($variable costing$)$ income statements for Shady for the year.

Which statement shows the higher operating income? Why?

The company marketing vice president believes a new sales promotion that

costs $$170,000$ would increase sales to $215,000$ goggles. Should the

company go ahead with the promotion? Give your reason.

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