Absorption and variable costing.

(CMA) Osawa, Inc., planned and actually manufactured 200,000 units of its single product in 2014, its first year of operation. Variable manufacturing cost was $20 per unit produced. Variable operating (nonmanufacturing) cost was $10 per unit sold. Planned and actual fixed manufacturing costs were $600,000. Planned and actual fixed operating (nonmanufacturing) costs totaled $400,000. Osawa sold 120,000 units of product at $40 per unit.

Required:

Osawas 2014 operating income using absorption costing is (a) $440,000, (b) $200,000, (c) $600,000, (d) $840,000, or (e) none of these. Show supporting calculations.

Osawas 2014 operating income using variable costing is (a) $800,000, (b) $440,000, (c) $200,000, (d) $600,000, or (e) none of these. Show supporting calculations.