13-45 Variable and Absorption Costing
Chan Manufacturing Company data for 20X7 follow:
Sales: 12,000 units at $17 each
|
Actual production (units) |
15,000 |
|
Expected volume of production (units) |
18,000 |
|
Manufacturing costs incurred |
|
|
Variable |
120,000 |
|
Fixed |
63,000 |
|
Nonmanufacturing costs incurred |
|
|
Variable |
24,000 |
|
Fixed |
18,000 |
1. Determine operating income for 20X7, assuming the firm uses the variablecosting approach to product costing. (Do not prepare a statement.)
2. Assume that there is no January 1, 20X7, inventory; no variances are allocated to inventory; and the firm uses a “full absorption” approach to product costing.
Compute: (a) the cost assigned to December 31, 20X7, inventory, (b) operating income for the year ended December 31, 20X7.(Do not prepare a statement.)