Question

Osawa, Inc., planned and actually manufactured 260,000 units of its single product in2017 , its first year of operation. Variable manufacturing cost was $26 per unit produced. Variable operating (nonmanufacturing) cost was $11 per unit sold. Planned and actual fixed manufacturing costs were $ 520,000. Planned and actual fixed operating (nonmanufacturing) costs totaled $ 370000. Osawa sold 180,000 units of product at $ 44 per unit.

Requirement 1. Osawa 's 2017 operating income using absorption costing is (a) $ 530,000 , (b) $ 370,000 , (c) $ 740,000 , (d) $900,000, or (e) none of these. Show supporting calculations.

Begin by selecting the labels used in the absorption costing calculation of operating income and enter the supporting amounts. (For amounts with a $0 balance, make sure to enter "0" in the appropriate cell.) calculations.

                                                   

2.requirement Osawa 's 2017operating income using variable costing is (a) $ 890,000 , (b) $ 530,000 , (c) $ 370,000 , (d) $ 740,000 , or (e) none of these. Show supporting calculations.

Answer 1

1. Osawa 's 2017 operating income using absorption costing is

Solution: (a) $ 530,000

Working:

Revenues		7,920,000
COGS
Variable manufacturing costs	4,680,000
Allocated fixed manufacturing costs	360,000	5,040,000
Gross margin		2,880,000
Operating costs
Variable operating	1,980,000
Fixed operating	370,000	2,350,000
Operating income		530,000

　

2) Osawa 's 2017operating income using variable costing is

Solution: 370,000

Working:

Revenues		7,920,000
Variable costs
Variable manufacturing costs	4,680,000
Variable operating costs	1,980,000	6,660,000
Contribtion margin		1,260,000
Fixed Costs
Fixed manufacturing costs	520,000
Fixed operating costs	370,000	890,000
Operating income		370,000