Four Sheets (FS) Company uses standard costing. Kate King, the new president of FS Company, is presented with the following data for 2015:

Required
1. At what percentage of denominator level was the plant operating during 2015?
2. How much fixed manufacturing overhead was included in the 2014 and the 2015 ending inventory under absorption costing?
3. Reconcile and explain the difference in 2015 operating incomes under variable and absorption costing.
4. Kate King is concerned. She notes that despite an increase in sales over 2014, 2015 operating income has actually declined under absorption costing. Explain how this occurred.

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Four Sheets Company 2Operating Statements of Comprehensive Income for the Year Ended December 31, 2015 3 4 5 Revenue 6 Cost of 7 Fixed man 8 Fixed man 9 Rate 10 Production volume 11 Total marketing and administrative costs (all fixed) 12 Total costs 13 Operating income 14 15 Inventories (at standard costs) 16 December 31,2014 17 December 31, 2015 Variable Absorption Costin Costin $9.000,000 $9.000,000 4,680,000 5,860,000 s sold (at standard costs 1,200,000 overhead (budgeted) overhead variances (all unfavourable 100,000 400,000 1,500,000 1500,000 7.480,000 7,860,000 $1520000 1140000 100,000 $1200,000 S1,720,000 206,000 66,000