1. Consider the following situation for Cannon Corporation for the prior year. The company produced 1,000 units and sold 900 units, both as budgeted. There were no beginning or ending work-in-process inventories and no beginning finished goods inventory.

   Budgeted and actual fixed costs were equal, all variable manufacturing costs are affected by volume of production only, and all variable selling costs are affected by sales volume only.

   Budgeted per unit revenues and costs were as follows.

   Per Unit

   Sales price $100

   Direct materials 30

   Direct labor 20

   Variable manufacturing costs 10

   Fixed manufacturing costs 5

   Variable selling costs 12

   Fixed selling costs ($3,600 total) 4

   Fixed admin costs ($1,800 total) 2

   The operating income for Cannon for the prior year using absorption costing was

   		$14,200
   		$13,600
   		$15,840
   		$15,300