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Chenango Can Company' s manufacture metal cans in food processing industry _ A case of cans sells for $45. The variable costs of oduction
Chenango Can Company' s manufacture metal cans in food processing industry _ A case of cans sells for $45. The variable costs of oduction for one case of cans are as follows. Direct material Direct labor. Variable manufa s 15 6 overhead Variable selling and administrative costs amount to S3 per case. Budgeted fixed manufacturing overhead is $900,000 per and fixed selling and administrative cost is $150,000 per year. The following data pertain to the company' s first three years of operation. (A unit refers to one case of cans. P1 anned production in units Finished-goods inventory (in units) Actual production (in Sales in units Finished-goods inventory (in units) December 31 Required: 0 150,000 0 0 150,000 125,000 25,000 25,000 150,000 165,000 10,000 1. Prepare operating income statements for S.P A Company for its first three years of operations using: a. Absorption costing b. Variable costing. 2. Reconcile Chenango Can Company' s operating income reported under absorption and variable costing for each of its first three years of operation. Use the shoncut method. 3- Explain in your words, why profits are same of different by both methods in all three years.
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