Osawa Inc. planned and actually manufactured 200,000 units of its single product in 2013, its first year of operation. Variable manufacturing cost was $20 per unit produced. Variable operating (non-manufacturing) cost was $10 per unit sold. Planned and actual fixed manufacturing costs were $600,000. Planned and actual fixed operating (non-manufacturing) costs totalled $400,000. Osawa sold 120,000 units of product at $40 per unit.

REQUIRED

1. Osawa’s 2013 operating income using absorption costing is

(a) $440,000,

(b) $200,000,

(c) $600,000,

(d) $840,000,

(e) None of these. Show supporting calculations.

2. Osawa’s 2013 operating income using variable costing is

(a) $800,000,

(b) $440,000,

(c) $200,000,

(d) $600,000,

(e) None of these. Show supporting calculations.