Gammaro Company uses standard costing. Tim St. Germaine, the new president of Gammaro Company, is presented with the following data for 2020:

Required

1. At what percentage of denominator level was the plant operating during 2020?
2. How much fixed manufacturing overhead was included in the 2019 and the 2020 ending inventory under absorption costing?
3. Reconcile and explain the difference in 2020 operating incomes under variable and absorption costing.
4. Tim St. Germaine is concerned: He notes that despite an increase in sales over 2019, 2020 operating income has actually declined under absorption costing. Explain how this occurred.

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1 2 Home Formulas Data Gammaro Company Income Statements for the Year Ended December 31, 2020 Insert Page Layout A 3 4 5 Revenues 6 Cost of goods sold (at standard costs) 7 Fixed manufacturing overhead (budgeted) 8 Fixed manufacturing overhead variances (all unfavorable): 9 Spending 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, 2019 17 December 31, 2020 Review View B Variable Absorption Costing Costing $9,050,000 $9,050,000 4,665,000 5,875,000 1,400,000 80,000 1,560,000 7,705.000 $1,345,000 80,000 350,000 1,560,000 7,865,000 $1,185,000 $1,465,000 $1,745,000 75,000 195,000