Chataqua Can Company manufactures metal cans used in the food processing industry. A case of cans sells for $35. The variable costs of production for one case of cans are as follows: Direct material Direct labor Variable manufacturing overhead Total variable manufacturing cost per case $ 9.50 2.00 9.00 $ 20.50 Variable selling and administrative costs amount to $0.70 per case. Budgeted fixed manufacturing overhead is $564,000 per year, and fixed selling and administrative cost is $47,500 per year. The following data pertain to the company's first three years of operation, Year 1 94,000 Year 2 94,000 Planned production (in units) Finished-goods inventory (in units), January 1 Actual production (in units) Sales (in units) Finished-goods inventory (in units), December 31 Year 94,000 30,000 94,000 109,000 15,000 94, eee 94,000 94,000 64,000 30,000 Actual costs were the same as the budgeted costs. Required: firmare onerating income statements for Chataqua Can Company for its first three years of operations using: Required: 1. Prepare operating income statements for Chataqua Can Company for its first three years of operations using a. Absorption costing b. Variable costing 2. Reconcile Chataqua Can Company's operating income reported under absorption and variable costing for each of its first three years of operation. Use the shortcut method. 3. Suppose that during Chataqua's fourth year of operation actual production equals planned production, actual costs are as expected, and the company ends the year with no inventory on hand a. What will be the difference between absorption-costing income and variable costing income in year 4? b. What will be the relationship between total operating income for the four-year period as reported under absorption and variable costing? Reg 1A Reg 1B Reg 2 Req Reg 3B Prepare operating income statements for Chataqua Can Company for its first three years of operations using absorption costing Year 1 Year 2 Year 3 $ 0 0 $ 0$ Selling and Administrative Expenses 0 0 0 $ $ S Reg 1A Reg 1B Reg 2 Reg 3A Reg 3B Prepare operating income statements for Chataqua Can Company for its first three years of operations using variable cost Year 1 Year 2 Year 3 13 Variable expenses $ 0 $ 0 $ 0 Fixed expenses $ 0 $ 0 $ 0 Req 1A Reg 1B Req 2 Req Req 3B Reconcile Chataqua Can Company's operating income reported under absorption and variable costing fo years of operation. Use the shortcut method. Year Change in inventory (in units) x Predetermined fixed overhead rate Difference in fixed overhead expensed under absorption and variable costing 2 2 3 Complete this question by entering your answers in the tabs Req 3B Req Reg 2 Req 18 Req 1A Suppose that during Chataqua's fourth year of operation actual production equals planned production, expected, and the company ends the year with no inventory on hand. What will be the difference betw income and variable-costing income in year 4? Difference in reported income
