Company uses standard costing. Tim Gammaro , the new president of Berkner Company, is presented with the following data for 2014 :

Comapny Income Statement Yr ended Dec 31,2014

Variable Costing Absorption Costing

Revenues 8,850,000 8,850,000

Cost of Good Sold (standard costs) 4,660,000 5,850,000

Fixed manufac overhead (budgeted) 1,350,000 -----

Fixed Manufac overhead variances (all unfavorable)

Spending 120,000 1,565,000

Production volume ------ 120,000

Total marketing and admin costs (all fixed) 1,565,000 1,565,00

Total cost 7,695,000 7,940,000

Operatong Income 1,155,000 910,000

Inventories (at standard costs)

December 31, 2013 1,340,000 1,690,000

December 31, 2014 75,000 180,000

Requirements

1.	At what percentage of denominator level was the plant operating during 2014?
2.	How much fixed manufacturing overhead was included in the 2013 and the 2014 ending inventory under absorption costing?
3.	Reconcile and explain the difference in 2014 operating incomes under variable and absorption costing.
4.	Tim Gammaro is concerned: He notes that despite an increase in sales over 2013, 2014 operating income has actually declined under absorption costing. Explain how this occurred.