Variable Costing Problem Given Information: a) Buzz Energy Drink is produced by the Ratataade Corporation. Ratorade expects to produce 10,000 cases in the first year, 12,000 cases in the second year, and 15,000 cases in the third year. Ratoreads expects to sell 8,000 in the first year, 14,000 in the second year, and 14,000 in the third year. b) Each case uses $10 in direct materials and $3 in direct labor, and $2 in variable overhead. c) Each case is sold for $25. d) Fixed manufacturing costs are $80,000 per year. Fixed GSA costs are $40,000 per year. Absorption Costing Income Statements (GAAP) Year 1 Year 2 Revenue Revenue Less: COGS: Less: COGS: DM DM DL DL VMOH VMOH FMOH FMOH COGS TH COGS Gross Gross Profit Profit Less: GSA Less: GSA Net Income - GAAP Net Income - GAAP Year 3 Revenue Less: COGS: DM DL VMOH FMOH TU COGS Gross Profit Less: GSA Net Income GAAP Variable Costing Income Statements (NOT GAAP) Year 1 Year 2 Revenue Revenue Less: Variable COGS: Less: Variable COGS: DM DM DL DL VMOH VMOH Tu Variable COGS The Variable COGS: Total Cont. Margin Total Cont. Margin Less: Fixed Costs Less: Fixed Costs Net Income - VC Net Income - VC Year 3 Revenue Less: Variable COGS: DM DL VMOH TL Variable COGS: Total Cont. Margin Less: Fixed Costs Net Income - VC