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;