13-45 Variable and Absorption Costing Chan Manufacturing Company data for 20X7 f

Question

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;

Explanation / Answer

1. Determine operating income for 20X7, assuming the firm uses the variable-costing approach to product costing. (Do not prepare a statement.) $15,600 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; Manufacturing costs incurred Variable $120,000 Fixed 63,000 $183,000 Nonmanufacturing costs incurred Variable $ 24,000 Fixed 18,000 $ 42,000 Total Cost incurred $225,000 ====== Units Manufactured 15,000 Manufacturing cost per unit $15 Ending Inventory cost $45,000

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