The Semi-Fixed Company. The Semi-Fixed Company also began operations in 2009 and 1,

(a) Operating income for differs from The All-F ixed Company (described in Problem 9-34) by having both variable 2009, $36,000 and fixed manufacturing costs.

The variable manufacturing costs are $8.40 per tonne, and the fixed manufacturing costs are $140,000 per year. The denominator level is 20,000 tonnes per year.

REQUIRED 1. Using the same data as in Problem 9-34 except for the change in manufacturing cost behaviour, prepare income statements with adjacent columns for 2009, 2010, and the two years together, under

(a) variable costing and

(b) absorption costing.

2. Explain the differences in operating income for The Semi-Fixed Company and The All-Fixed Company.

3. What inventory costs would be carried on the balance sheets at December 31, 2009 and 2010 under each method?

4. Assume that the performance of the top manager of the company is evaluated and rewarded largely based on reported operating income. Which costing method would the manager prefer? Why?

LO1