Break-even point: Break-even point refers to a point where sales of the company are just good enough to meet all its cost. It is used by the company to know the level of quantity they needed to sales to earn back their cost. Absorption costing: Absorption costing refers to a costing system which allocates not only variable manufacturing cost but also fixed cost to get the cost of goods sold. To prepare: Income statement using variable costing.

Step 1: Determine the break-even point and explain its definition. - The break-even point refers to a point where sales of the company are just good enough to meet all its cost. It is used by the company to know the level of quantity they needed to sell to earn back their cost. Step 2: Determine absorption costing and explain its definition. - Absorption costing refers to a costing system which allocates not only variable manufacturing cost but also fixed cost to get the cost of goods sold. Step 3: Prepare an income statement using variable costing. Step 4: Determine the preparation of an income statement using absorption costing. Step 5: Determine the computation of the break-even point if W Company uses variable costing. Step 6: Determine the computation of the break-even point if W Company uses absorption costing. Step 7: Determine the computation of the proof of break-even calculations. Step 8: Explain whether there will be any change in the break-even quantity if $20,000 of fixed administrative cost were classified as fixed production cost. Step 9: Explain the effect on the break-even point on the price increase of a material.