The annual data that follows pertian to Joe's Pool Stuff, a manufacturer of swimming goggles (the company had no beginning inventories):

Sales price $43
Variable manufacturing expense per unit $16
Sales commision expense per unit $11
Fixed manufacturing overhead $1,640,000
Number of goggles produced 205,000
Number of goggles sold 195,000
Requirements

1. Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for Joe's Pool Stuff for the year.

2. Which statement shows the higher operating income? Why?

3. The company marketing vice president believes a new sales promotion that costs $140,000 would increase sales to 205,000 goggles. Should the company go ahead with the promotion? Give your reason.

Requirement 1. Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for Joe's Pool Stuff for the year. Begin with the conventional (absorption costing) income statement.

Joe's Pool Stuff Income Statement (Absorption Costing)

For the Year Ended December 31

Less:
Less: Operating Expenses