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Adams Company, a manufacturer of in-home decorative fountains, began operations on September 1 of the current year. Its cost and sales information for this year follows.                                           

  Production costs                                            

     Direct materials                                                                           $ 35 per unit

     Direct labor                                                                                    $ 55 per unit

     Overhead costs for the year                                  

         Variable overhead                                                                  $ 3,150,000         

         Fixed overhead                                                                       $ 7,350,000         

  Nonproduction costs for the year                                           

     Variable selling and administrative                                      $ 725,000            

     Fixed selling and administrative                                            $ 4,750,000         

  Production and sales for the year                                           

     Units produced                                                                           105,000 units

     Units sold                                                                                      75,000   units

     Sales price per unit                                                                     $ 360 per unit




1.            Prepare an income statement for the company using absorption costing.

2.            Prepare an income statement for the company using variable costing.

3.            Under what circumstance(s) is reported income identical under both absorption costing and variable costing

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