Comparison of variable costing and absorption costing. Hinkle Company uses standard costing. Tim Bartina, the new president of Hinkle Company, is presented with the following data for 2009:

1.         At what percentage of denominator level was the plant operating during 2009?

2.         How much fixed manufacturing was included in the 2008 and the 2009 ending inventory under overhead absorption costing?

3.         Reconcile and explain the difference in 2009 operating incomes under variable and absorption costing.

4.         Tim Bartina is concerned: He notes that despite an increase in sales over 2008, 2009 operating income has actually declined under absorption costing. Explain how this occurred.

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Hinkle Company Income Statements for the Year Ended December 31, 2009 Variable Absorption Costing $9,000,000 4,680,000 Costing $9,000,000 5,860,000 Revenues Cost of goods sold (at standard costs) Fixed manufacturing overhead (budgeted) Fixed manufacturing overhead variances (all unfavorable): Spending Production volume Total marketing and administrative costs (all fixed) Total costs Operating income 1,200,000 100,000 100,000 400,000 1,500,000 1,500,000 7.860,000 $1,140.000 7.480,000 $1.520.000 Inventories (at standard costs) December 31, 2008 December 31, 2009 $1,720,000 206,000 $1,200,000 66,000