Clean Michigan Inc

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Clean Michigan Inc. produces an environmentally friendly cleaning material which it sells wholesale at a price of $60 per case. The firm uses normal volume of 4,000 cases as the denominator for allocating fixed manufacturing overhead to the product. Costs and production and sales volumes for the first two years of the firm's operation are presented below. Assume that there are no variances except the production volume variance for fixed manufacturing overhead, and that this variance is closed to cost of goods sold at the end of the year. Also, assume FIFO inventory accounting. Year 1 Year 2 Sales (in cases) 3,200 3,500 Production (in cases) 3,600 3,200 Production costs: Variable manufacturing costs $18,000 $16,320 Fixed manufacturing overhead $48,000 $48,000 Selling and administrative costs: Variable $ 7,680 $ 8,750 Fixed $20,000 $20,000 Requirements 1. Create absorption-costing and variable-costing income statements for Year 1 and Year 2. Exhibit 9-2 in the textbook provides a useful model.