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Chenango 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
Chenango 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 $ 9.00 3.50 B.00 overhead Total variable manufacturing cost per case $20.50 Variable selling and administrative costs amount to S.50 per case. Budgeted fixed manufacturing overhead is $552,000 per year, and fixed selling and administrative cost is $46,500 per year. The following data pertain to the company's first three years of operation. (A unit refers to one case of cans.) 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 1 Year 2 Year 3 92,000 92,000 92,000 0 29,000 92,000 92,000 92,000 92,000 63,000 106,500 0 29,000 14,500 Actual costs were the same as the budgeted costs. Required 1. Prepare operating income statements for Chenango Can Company for its first three years of operations using a. Absorption costing: 5 3,220,000 2,205,000 3,727,500 Sales revenue Less: Cost of goods sold Gross margin Selling and Administrative Expenses 2,438,000 782,000 2,205,000 3,727,500 Variable selling and administrative Fixed selling and administrative Operating income 782,000 2,205,000 3,727,500
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