ACCOUNTING 561 Week 5 13-B3 13-45 13-48 13-49

13-B3 Comparison of Variable Costing and Absorption Costing
Consider the following information pertaining to a year’s operations of Youngstown Manufacturing:

Question 13-45:

13-45 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.
(Do not prepare a statement.)

13-48:

Overhead Variances

Study Appendix 13. Consider the following data for the Rivera Company:

13-49:

13-49 Variances

Study Appendix 13. Consider the following data regarding factory overhead:

SOLUTION PREVIEW
Under absorption costing, all manufacturing costs (variable and fixed) are included in product costs.

Direct materials	3500
Direct labor	4200

 

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