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. **Define Break-even point:** The break-even point refers to a point where the sales of a company are just enough to cover all its costs. It helps the company determine the quantity of sales needed to recover its costs. Step 2. **Define Absorption costing:** Absorption costing is a costing system that includes both variable manufacturing costs and fixed costs in the cost of goods sold. Step 3. **To prepare:** To prepare an income statement using variable costing. Step 4. **Solution:** The income statement using variable costing is shown below: [Income Statement] Step 5. **To prepare:** To prepare an income statement using absorption costing. Step 6. **To determine:** To compute the break-even point if W Company uses variable costing. Step 7. **To determine:** To compute the break-even point if W Company uses absorption costing. Step 8. **To determine:** To compute the proof of break-even calculations. Step 9. **To determine:** To explain whether there will be any change in the break-even quantity if $20,000 of fixed administrative costs were classified as fixed production costs. Step 10. **To determine:** To explain the effect of a price increase of a material on the break-even point.