Answer:
Instructions are below.
Explanation:
<u>The absorption costing</u> method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.
<u>The variable costing </u>method incorporates all variable production costs (direct material, direct labor, and variable overhead).
<u>Absorption costing income statement:</u>
<u></u>
Sales= 12,000*54= 648,000
COGS= (12,000*27) + 120,000= (444,000)
Gross profit= 204,000
Total operating expenses= (12,000*4) + 92,000= (140,000)
Net operating income= 64,000
<u>Variable costing income statement:</u>
Sales= 648,000
Total variable cost= 12,000*(27 + 4)= (372,000)
Total contribution margin= 276,000
Fixed manufacturing overhead= (120,000)
Fixed operating expenses= (92,000)
Net operating income= 64,000