Absorption and variable costing. (CMA) Osawa, Inc., planned and actually manufactured 200,000 units of its single product in 2007, its first year of operation. Variable manufacturing costs were $24 per unit produced. Variable marketing and administrative costs were $10 per unit sold. Planned and actual fixed manufacturing costs were $600,000. Planned and actual fixed marketing and administrative costs totalled $400,000 in 2007. Osawa sold 120,000 units of product in 2007 at a selling price of $48 per unit.

Required 1. Osawa’s 2007 operating income using absorption costing is

(a) $920,000,

(b) $418,182,

(c) $1,254,000,

(d) $1,760,000,

(e) none ofthese.

2. Osawa’s 2007 operating income using variable costing is

(a) $2,600,000,

(b) $1,504,256

(c) $680,000,

(d) $2,040,000,

(e) none of these.