Variable and Absorption Costing:
Chan Manufacturing Company data for 20X7 follow: Sales: 12,000 units at $17 each Actual production 15,000 units Expected volume of production 18,000 units 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 variable-costing 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; and
(b) operating income for the year ended December 31, 20X7.
