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

Goggles Only

Income Statement $($Absorption Costing$)$

For the Year Ended December $31$

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

Goggles Only

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

For the Year Ended December $31$

Data table

Requirement $2.$ Which statement shows the higher operating income? Why?

Absorption costing operating income is

variable costing operating income. This is because absorption costing

defers $

of fixed manufacturing overhead as an asset in ending inventory. In contrast, variable costing expenses

the fixed manufacturing overhead during the year.