Units sold 1,400
Units produced 1,600
Direct labor $4,200
Direct materials used 3,500
Fixed manufacturing overhead 2,200
Variable manufacturing overhead 300
Selling and administrative expenses (all fixed) 700
Beginning inventories 0
Contribution margin 5,600
Direct-material inventory, end 800
There are no work-in-process inventories.
1. What is the ending finished-goods inventory cost under absorption costing?
2. What is the ending finished-goods inventory cost under variable 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
Nonmanufacturing costs incurred
Variable $ 24,000
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; and (b) operating income for the year ended December 31, 20X7.
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