A B 1 Smith Company N Income Statements for the Year Ended December 31, 2020 Variable Absorption Costing Costing 3 4 Revenues $ 9,250,000 $ 9,250,000 4,690,000 5,865,000 5 Cost of goods sold (at standard costs) 6 Fixed manufacturing overhead (budgeted) Fixed manufacturing overhead variances (all 7 unfavorable): 1,250,000 0 00 8 Spending 75,000 75,000 9 Production volume 0 450,000 10 Total marketing and administrative costs (all fixed) 1,580,000 1,580,000 11 Total costs 7,595,000 7,970,000 12 Operating income $ 1,655,000 $ 1,280,000 13 Inventories (at standard costs) $ 1,235,000 $ 1,740,000 14 December 31, 2019 15 December 31, 2020 80,000 210,000 Requirement 1. At what percentage of denominator level was the plant operating during 2020? Determine the formula, then compute at what percentage of denominator level the plant was operating during 2020. (Abbreviation used: "mfg" = manufacturing.) Fixed mfg overhead allocated Budgeted fixed mfg overhead = % of denominator level % Requirement 2. How much fixed manufacturing overhead was included in the 2019 and the 2020 ending inventory under absorption costing? Determine the formula, then compute how much of fixed manufacturing overhead was included in the 2019 and the 2020 ending inventory under absorption costing. (Abbreviation used: "mfg" = manufacturing.) Fixed mfg overhead Absorption costing inventory value Variable costing inventory value in inventory 2019 = 2020 II Requirement 3. Reconcile and explain the difference in 2020 operating incomes under variable and absorption costing. Begin by determining the formula that will highlight the difference between the operating income under each method, then complete the equation for 2020. (Abbreviations used: "var." = Variable, "mfg" = manufacturing, "beg." = beginning, "end." = ending.) Variable-costing Absorption-costing operating income operating income = Fixed mfg costs in end. inventory Fixed mfg costs in beg. inventory 2020 =