(CMA adapted) Denham Company began operations in January 2009. Standard costs we

Question

(CMA adapted) Denham Company began operations in January 2009. Standard costs were established at that time. . During 2009, Denham produced only 140,000 units of output and sold 100,000 units at a selling price of $180 per unit. Variable costs total $7,000,000, of which 60% are manufacturing. Fixed costs total $11,200,000, of which 50% are manufacturing. Denham has no materials or work-in-process inventories at December 31, 2009. Actual input prices per unit of output and actual input quantities per unit of output are equal to the standard amounts. a. Compute the cost of finished goods inventory at December 31, 2009, under variable costing. b. Compute the cost of finished goods inventory at December 31, 2009, under absorption costing. c. Compute operating income for 2009 under variable costing.(Prepare income statement Hint) d. Compute operating income for 2009 under absorption costing. (Prepare Income Statement Hint) e. Reconcile by formula the difference between operating income for 2009 under variable costing and absorption costing (that is, the difference between the answers for parts (c) and (d) above).

Explanation / Answer

(CMA adapted) Denham Company began operations in January 2009. Standard costs we

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