Variable and Absorption Costing Scott Manufacturing makes only one product with total unit manufacturing costs of $54, of which $36 is variable. No units were on hand at the beginning of 2015. During 2015 and 2016, the only product manufactured was sold for $84 per unit, and the cost structure did not change. Scott uses the first-in, first-out inventory method and has the following production and sales for 2015 and 2016: Units Manufactured Units Sold 2015 120,000 90,000 2016 120,000 130,000 $ $ a. Prepare gross profit computations for 2015 and 2016 using absorption costing. Do not use negative signs with your answers. Absorption Costing 2015 2016 Sales Cost of goods sold: Beginning inventory Production Goods available Less: Ending inventory Cost of goods sold Gross profit $ $ Variable and Absorption Costing Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows: Sales (75,000 units) $6,000,000 Production costs (80,000 units) Direct material 1,760,000 Direct labor 1,440,000 Manufacturing overhead: Variable 1,088,000 Fixed 640,000 Operating expenses: Variable 336,000 Fixed 480,000 Depreciation on equipment 120,000 Real estate taxes 36,000 Personal property taxes (inventory & equipment) 57,600 Personnel department expenses 60,000 a. Prepare an income statement based on full absorption costing. Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable. Absorption Costing Income Statement Sales $ 0 Cost of Goods Sold: Beginning Inventory 0 Direct materials 0 Direct labor 0 $ 0 0 Less: Ending Inventory Cost of Goods Sold 0 0 0 Net Income (Loss) $ 0 b. Prepare an income statement based on variable costing. Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable. $ 0 Variable Costing Income Statement Sales Variable cost of Goods Sold: Beginning Inventory $ 0 Direct materials 0 Direct labor 0 0 0 Less: Ending Inventory Variable cost of goods sold 0 0 0 Fixed costs: 0 0 Operating expenses Total Fixed Cost Net Income (Loss) 0 $ 0 C. Assume that you must decide quickly whether to accept a special one-time order for 1,000 units for $60 per unit. Which income statement presents the most relevant data? Determine the apparent profit or loss on the special order based solely on these data. Use a negative sign with your answer if the special order creates an apparent loss. Round answer to the nearest whole number. $ 0 C. Assume that you must decide quickly whether to accept a special one-time order for 1,000 units for $60 per unit. Which income statement presents the most relevant data? Determine the apparent profit or loss on the special order based solely on these data. Use a negative sign with your answer if the special order creates an apparent loss. Round answer to the nearest whole number. $ 0 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? Select the most appropriate statement. Absorption costing approach because the cost should include a reasonable portion of fixed manufacturing costs. Variable costing approach because the cost should include a reasonable portion of fixed manufacturing costs