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.)
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