Question: Sanjog and Rajiv Gupta have started a business that manufactures and sells thermal mugs. Users personalize the mugs by plugging them into a laptop and downloading their favorite images from a digital camera. The company makes two mug sizes: 16 and 24 ounce mugs. This is its first year of business. The following data summarize operations for the first year.
![2189_3.jpg](https://secure.tutorsglobe.com/CMSImages/2189_3.jpg)
There were no beginning inventories. Overhead is assigned to products using direct labor dollars.
Required: a. Calculate Mystic Mugs's net income before taxes using absorption costing.
b. Calculate Mystic Mugs's net income before taxes using variable costing.
c. Prepare a table that reconciles any difference between the two net income figures calculated in parts (a) and (b).
d. Write a short memo explaining in lay terms any difference between the two net income figures calculated in parts (a) and (b).