Griswold Company began operations in 2013.The company manufacturers a professionaI-grade vacuum cleaner and can make up to 18,090 units each year. Actual data for 2013 are given as follows:
1. Prepare a 2013 income statement for Griswold Company using variable costing.
2. Prepare a 2013 income statement for Griswold Company using absorption costing.
3. Explain the differences in operating incomes obtained in requirement 1 and requirement 2.
4. Griswold’s management is considering implementing a bonus for the supervisors based on gross margin under absorption costing. What incentives will this create for the supervisors? What modifications could Griswold management make to improve such a plan? Explain briefly.
