ACC 561: Question 13-45, Variable and Absorption Costing Solution

ACC 561

Axia College of University of Phoenix (UoP)

Introduction to Management Accounting

Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2008). Introduction to Management Accounting (14th ed.). Upper Saddle River, New Jersey: Pearson-Prentice Hall.


3. Individual Assignment: Text Exercises

• Complete the following Problem Sets from the text. Show your work.

Question 13-45, Variable and Absorption Costing, on p. 621

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Question 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; and (b) operating income for the year ended December 31, 20X7. (Do not prepare a statement.)

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