Variable costing versus absorption costing The following information was drawn from the records of Daffin Company:

During the most recent month Daffin produced 4,000 units of product and sold 3,800 units of product at a sales price of $98 per unit.
Required
a. Prepare an income statement for the month using absorption costing.
b. Prepare an income statement for the month using variable costing.
c. Explain why a company might use one type of income statement for external reporting and a different type for internal reporting.

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Variable costs (per unit) Direct materials Direct labor Manufacturing overhead Selling and administrative Fixed costs (in total) Manufacturing overhead Selling and administrative $16 $48,000 49,600 6. 14