Required: 1. Prepare an income statement based on the absorption costing concept. 2. Prepare an income statement based on the variable costing concept. 3. Explain the reason for the difference in the amount of operating income reported in (1) and (2)

2. Distinguish between product costs and period costs. 6. What is the difference between gross margin and manufacturing margin?

The equation for total costs (Y) is: Y = a+ bX In this equation, “a” represents:  Net income Cost of goods sold Total fixed costs The level of activity (e.g., the number of units produced) Total variable costs Variable cost per unit of X Total revenue

Sunland Products manufactures and sells a variety of camping products. Recently the company opened a new factory to manufacture a deluxe portable cooking unit. Cost and sales data for the first month of operation are shown below: Beginning inventory Units produced Units sold Manufacturing costs Fixed overhead Variable overhead Direct labour Direct material Selling and administrative costs Fixed Variable 0 units 11,200 10,100 $100,800 $3 $12 $28 $207,100 per unit. per unit per unit $3 per unit sold The portable cooking unit sells for $110. Management is interested in the opening month's results and has asked for an income statement.