Smart Products Inc (1) All 200,000 Units Produced During Year 1 Are Sold

Smart Products Inc.produces smart phones.The company has no finished goods inventory at the beginning of year 1.The following information pertains to Smart Products Inc.
$\begin{array}{ll}\text { Annual production } & 200,000 \text { units } \\\text { Sales price } & \$ 400 \text { per unit }\\\text { Variable production cost per unit: }\\\text { Direct materials } & \$ 120 \\\text { Direct labor } & 60 \\\text { Manufacturing overhead } & 80 \\\text { Total variable cost per unit }& \$ 260 \text { per unit}\\\\\text { Fixed production costs } & \$ 400,000 \text { each year; } \$ 2 \text { per unit } \\& \text { at } 200,000 \text { units of production } \\\text { Variable selling and admin. cost } & \$ 20 \text { per unit } \\\text { Fixed selling and admin. costs } & \$ 400,000 \text { each year }\end{array}$
(1) All 200,000 units produced during year 1 are sold during year 1 .
a. Prepare a traditional income statement assuming the company uses absorption costing.
b. Prepare a contribution margin income statement assuming the company uses variable costing

(2) Although 200,000 units are produced during year 2 , only 160,000 are sold during the year. The remaining 40,000 units are in finished goods inventory at the end of year 2 .
a. Prepare a traditional income statement assuming the company uses absorption costing.
b. Prepare a contribution margin income statement assuming the company uses variable costing