The annual data that follow pertain to Swim Clearly, a manufacturer of swimming goggles (Swim Clearly has no beginning inventories).

Requirements
1. Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for Swim Clearly for the year.
2. Which statement shows the higher operating income? Why? Reconcile the difference between the two statements.
3. Swim Clearly€™s marketing vice president believes a new sales promotion that costs $145,000 would increase sales to 215,000 goggles. Should the company go ahead with the promotion? Give your reason.

Transcribed Image Text:

$42 Sale price Variable manufacturing Fixed manufacturing overhead.. 20 Number of goggles produced 5 Number of goggles sold.. 265,000 215,000 200,000 .... Sales commission expense per unit