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.)