Revision Problems 9-21 Absorption and variable costing. (CMA) Osawa, Inc., planned and actually manufactured 200,000 units of its single product in 2014, its first year of operation. Variable manufacturing cost was $20 per unit produced. Variable operating (nonmanufacturing) cost was $10 per unit sold. Planned and actual fixed manufacturing costs were $600,000. Planned and actual fixed operating (nonmanufacturing) costs totaled $400,000. Osawa sold 120,000 units of product at $40 per unit Required: 1. Osawa's 2014 operating income using absorption costing is (a) $440,000, (b) $200,000, (C) $600,000, (d) $840,000, or (e) none of these. Show supporting calculations. 2. Osawa's 2014 operating income using variable costing is (a) S800,000, (b) S440,000. (C) $200,000, (d) $600,000, or (e) none of these. Show supporting calculations. Exercise 2 Support Departments Operating Departments Administration Information Domestic World Tocal Technology To Tours Budgeted OH 5400,000 250.000 1.300.000 1.840,000 3,790,000 costs before any allocation Support work administration Badgeted 220,000 by 0 55.000 77.000 admin salaries 2200 1200 4000 Support work by IT Budgeted IT 600 Service Hours Required: 1. What are the total overhead costs of the operating departments (domestic and world tours) after the support department costs of Administration and Information Technology have been allocated using (a) the direct method, (b) the step-down method (allocate Administration first). (c) the step-down method (allocate Information Technology first), and (d) the reciprocal method? 2. Which method would you recommend that Montclair Tours use to allocate service department costs? Why