Some additional requirements for Problem 9-36; absorption costing and productionvolume variances.

Required 1. What operating income will be reported for 2007 as a whole, assuming that the implied cost behaviour patterns will continue in December as they did in January through November

(without regard to your answer to requirement 1 in Problem 9-36), and that production for December is 80 units and sales are 70 units?

2. Assume the same conditions as in requirement 1 except that a monthly denominator level of 125 units (practical capacity) was used in setting fixed manufacturing overhead rates for inven¬

tory costing throughout 2007. What production volume variance would be reported for 2007?