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Chataqua Can Company manufactures metal cans used In the food-processing Industry. A case of cans sells for $30. The variable costs of production for one
Chataqua Can Company manufactures metal cans used In the food-processing Industry. A case of cans sells for $30. 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 Variable selling and administrative costs amount to $0.60 per case. Budgeted xed manufacturing overhead is $522,000 per year, and xed selling and administrative cost is $44,000 per year The following data pertain to the company's rst three years of operation. Year 1 Year 2 Year 3 Planned production tin units: SL000 07,000 07,000 Finishedgoods inventory tin units]; January 1 0 0 26.500 Actual production [in units} 3?,000 37.000 37.000 sales tin unite} 37.000 60.500 100.250 Finishedgoods inventory [in units], December 31 0 26.500 13.250 Actual costs were the same as the budgeted costs. Required: 1. Prepare operating income statements for Chataqua Can Company for its rst three years of operations using: 3. Absorption costing. b. Variable costing 2. Reconcile Chataqua Can Compa ny'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 Chataoua'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 costlng
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