Goran Grill Company makes a single product - a handmade                                                           specialty barbeque grill that sells for $600. Data for last year’s                                                        operations follow:

                                   

                                   Unitsin beginninginventory                         0

                                   Unitsproduced                                    50,000

                                   Units sold                                              40,000

                                   

                       

                                   Variable costs per unit:

                                   Directmaterials                                  $      150

                                   Directlabor                                               120

                                   Variable manufacturingoverhead             100

                                   Variable selling and administrative             30

                                   Total variable cost perunit                $      400

                                   Fixed costs:

                                   Fixed manufacturingoverhead        $1,500,000

                                   Fixed selling andadministrative        600,000

                                  Total fixedcosts                             $2,100,000

                                  Required:

1. Compute the unit product cost for one barbequegrill for absorption costing and variable costing.
2. Prepare an income statement for the year usingthe absorption costing approach.
3. Prepare an income statement for the year usingthe variable costing approach.
4. Explain the difference in operating income forthe absorption and variable costing approaches.