Summarized data for 2019 (the first year of operations) for Gorman Products, In. are as follows

Sales (70,000 units)	$2,800,00
Production costs (80,000 units):
Direct materials	880,000
Direct labor	720,000
Manufacturing overhead:
Variable	544,000
Fixed	320,000
Operating expenses:
Variable	175,000
Fixed	240,000
Depreciation on equipment	60,000
Real estate taxes	18,000
Personal property taxes (inventory and equipment	28,000
Personnel department expenses	30,000

 

a.) Prepare an income statement based on full absortion costing

b) Prepare an income statement based on variable costing.

c) Assume that you must decide quickly whether to accept a special one-time order for 1000 units for $25 per unit.  Which income statement present the most relevant data?  Determine the apparent profit or loss on the special order based solely on these data.

d) If the ending inventory is destroyed by fire, which costing approach would you use as a basis for filing an insurance claim for the fire loss?  Why?