Operating income using absorption costing


Task: Use this information to answer problems below:

Osawa, Inc. planned and actually manufactured 200,000 units of its single product in 2001, its first year in operation. Variable manufacturing costs were $20 per unit produced. Variable operating costs were $10 per unit sold. Planned and actual fixed manufacturing costs were $600,000. Planned and actual operating costs totaled $400,000 in 2001. Osawa sold 120,000 units of product in 2001 at a selling price of $40 per unit.

Q1. Osawa's 2001 operating income using absorption costing is:

a. $440,000
b. $200,000
c. $600,000
d. $840,000
e. None of these

Q2. Osawa's 2001 operating income using variable costing is:

a. $800,000
b. $440,000
c. $200,000
d. $600,000
e. None of these

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Accounting Basics: Operating income using absorption costing
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