Requirements Data Table $ 45 $ 20 1. Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for Aqua Goggles for the year. 2. Which statement shows the higher operating income? Why? 3. The company marketing vice president believes a new sales promotion that costs $140,000 would increase sales to 220,000 goggles. Should the company go ahead with the promotion? Give your reason. $ 7 Sales price. Variable manufacturing expense per unit Sales commission expense per unit Fixed manufacturing overhead. Fixed operating expenses Number of goggles produced Number of goggles sold $ 1,980,000 $ 250,000 220,000 198,000 Print Done Print Done The annual data that follow pertain to Aqua Goggles, 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 Aqua Goggles for the year. Begin with the conventional (absorption costing) income statement. Aqua Goggles Income Statement (Absorption Costing) For the Year Ended December 31 Less: Less: Operating expenses Aqua Goggles Contribution Margin (Variable Costing) Income Statement For the Year Ended December 31 Less: Less 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. Variable costing expenses $ costs during the year, so variable costing operating income is $ than absorption costing income the year. Requirement 3. The company marketing vice president believes a new sales promotion that costs $140,000 would increase sales to 220,000 goggles. Should the company go ahead with the promotion? Give your reason. Use the contribution margin income statement format to evaluate the sales promotion. Increase in contribution margin Increase in fixed expenses Increase in operating income Aqua Goggles V with the promotion because the increase in contribution margin the increase in fixed costs Windows