The Z-watch Co manufactures trendy, high-quality moderately priced watches. As Z-watch''s senior financial analyst, you are asked to recommend a method of inventory cositn to the chief financial officer (CFO). The CFO will use your recommendation to construct Z-watch''s 2008 income statement. The following data are for the year ended Dec 31, 08: beginning inventory Jan 1, 08 85,000 units, ending inventory Dec 31, 08 34,500 units, 2008 sales are 34,500 units, selling price (to distributor) $22 per unit, variable manufacturing cost per unit, including direct materials $5.10 per unit, variable operating cost per unit sold $1.10 per unit sold, fixed manufacturing overhead $1,440,000, denoinator-level machine-hrs 6,000, standard production rate 50 units per machine hr, fixed operating costs $1,080,000-Assume costs per unit are the same for units in beginning inventory & units produced during the year. Also, assume the prices & unit costs did not change during the year. Prepare the following to assist the CFO of Z-watch: 1. Prepare income statements under variable contribution margin, and traditional absorption costing for the year ended Dec 31, 08. 2. What is Z-watch''s operating income under each costing method in percentage terms 3. Explain the difference in operating income between the two methods 4. Which costing method would you recommend to the CFO? Why?