a.    or each year, calculate income using absorption costing.

b.    Some firms use variable costing instead of absorption costing. Under variable costing, all fixed costs – both manufacturing and SG&A – are reported as expenses in the period in which they occur. For each year, calculate income using variable costing.

c.    Compare your income calculations across the two costing approaches. Are they different? If so, why?

d.    In class, we discussed why evaluating firm managers using absorption costing may encourage them to engage in dysfunctional behaviors. That said, are there circumstances in which you would recommend evaluating managers using absorption costing information?

module assignment #2ifit31FBFEB 14Times New R…12A- A- Aa . A ab A . . A + 5AaBbCcDdEAaBbCcDdEAaBb( AaBbCcDc AaBbCcDc AaBbCcDB I U rabe X2 X2 AT A . AEX13 1 21. The PTI Company sells its product at $3.00 per unit. PTI uses a FIFO costing system, and anew burden rate for allocating overhead is determined each year by dividing the overhead byunits produced. The following information pertains to the first two years of operations:-+Year 1-Year 2-Sales1,000 units 1,200 unitsProduction1,400 units 1,000 unitsCostsDirect manufacturing costs$700$500-Overhead (all fixed)$700$700-Variable SG&A$1,000$1,200Fixed SG&A+$400$400a.For each year, calculate income using absorption costing.~b. Some firms use variable costing instead of absorption costing. Under variable costing, allfixed costs – both manufacturing and SG&A – are reported as expenses in the period inwhich they occur. For each year, calculate income using variable costing.c. Compare your income calculations across the two costing approaches. Are they different? Ifso, why?-d. In class, we discussed why evaluating firm managers using absorption costing mayencourage them to engage in dysfunctional behaviors. That said, are there circumstances inwhich you would recommend evaluating managers using absorption costing information?~38 101, # 401 843 15 2169%