Question: Variable & Absorption Costing
Chan Manufacturing Company data for 20X7 follow:
Sales: 12,000 units at $17 each
Actual production 15,000 units
Fixed 63,000
Nonmanufacturing costs incurred
Expected volume of production 18,000 units
Manufacturing costs incurred
Variable $120,000
Variable $ 24,000
Fixed 18,000
[A] Calculate operating income for 20X7, suppose the company uses the variable-costing approach to product costing. [Do not make a statement.]
[B] Suppose 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. Calculate [A] the cost assigned to December 31, 20X7, inventory; & [B] operating income for the year ended December 31, 20X7.