Cleary Corporation is a manufacturer of computer accessories. It uses absorption costing based on standard costs and reports the following data for the year.

Theoretical capacity	262,500	units
Practical capacity	243,750	units
Normal capacity utilization	210,000	units
Selling price	$37	per unit
Beginning inventory	25,000	units
Production	215,000	units
Sales volume	235,000	units
Variable budgeted manufacturing cost	$3	per unit
Total budgeted fixed manufacturing costs	$2,730,000
Total budgeted operating (non-mfg.) costs (all fixed)	$280,000

There are no rate or efficiency variances. Actual operating costs equal budgeted operating costs. The production-volume variance is written off to COGS. For each choice of denominator level, the budgeted production cost per unit is also the cost per unit of beginning inventory.

Required

1.	What is the production-volume variance for the year when the denominator level is (a) theoretical capacity, (b) practical capacity, and (c) normal capacity utilization?
2.	Prepare absorption costing-based statements of comprehensive income for Cleary Corporation using theoretical capacity, practical capacity, and normal capacity utilization as the denominator levels.
3.	Why is the operating income under normal capacity utilization lower than the other two scenarios?
4.	Reconcile the difference in operating income based on theoretical capacity and practical capacity with the difference in fixed manufacturing overhead included in inventory.