Kerwin Company uses standard costing. Tim Gammaro, the new president of Kerwin Company, is presented with the following data for 2020: - X Data Table -X Requirements Costing 1 Kerwin Company 2 Income Statements for the Year Ended December 31, 2020 Variable Absorption 3 Costing 4 Revenues $ 8,900,000 $ 8,900,000 $ 5 Cost of goods sold (at standard costs) 4,670,000 5,880,000 6 Fixed manufacturing overhead (budgeted) 1,000,000 Fixed manufacturing overhead variances (all 7 unfavorable); 8 Spending 75,000 75,000 9 Production volume 0 380,000 10 Total marketing and administrative costs (all fixed) 1,565,000 1,565,000 11 Total costs 7,310,000 7,900,000 12 Operating income $ 1,590,000 $ 1,000,000 13 Inventories (at standard costs) 14 December 31, 2019 $ 1,040,000 $ 1,725,000 15 December 31, 2020 85,000 180,000 1. At what percentage of denominator level was the plant operating during 2020? 2. How much fixed manufacturing overhead was included in the 2019 and the 2020 ending inventory under absorption costing? 3. Reconcile and explain the difference in 2020 operating incomes under variable and absorption costing. 4. Tim Gammaro is concemed: He notes that despite an increase in sales over 2019, 2020 operating income has actually declined under absorption costing. Explain how this occurred. Print Done Kerwin Company uses standard costing. Tim Gammaro, the new president of Kerwin Company, is presented with the following data for 2020: - X Data Table -X Requirements Costing 1 Kerwin Company 2 Income Statements for the Year Ended December 31, 2020 Variable Absorption 3 Costing 4 Revenues $ 8,900,000 $ 8,900,000 $ 5 Cost of goods sold (at standard costs) 4,670,000 5,880,000 6 Fixed manufacturing overhead (budgeted) 1,000,000 Fixed manufacturing overhead variances (all 7 unfavorable); 8 Spending 75,000 75,000 9 Production volume 0 380,000 10 Total marketing and administrative costs (all fixed) 1,565,000 1,565,000 11 Total costs 7,310,000 7,900,000 12 Operating income $ 1,590,000 $ 1,000,000 13 Inventories (at standard costs) 14 December 31, 2019 $ 1,040,000 $ 1,725,000 15 December 31, 2020 85,000 180,000 1. At what percentage of denominator level was the plant operating during 2020? 2. How much fixed manufacturing overhead was included in the 2019 and the 2020 ending inventory under absorption costing? 3. Reconcile and explain the difference in 2020 operating incomes under variable and absorption costing. 4. Tim Gammaro is concemed: He notes that despite an increase in sales over 2019, 2020 operating income has actually declined under absorption costing. Explain how this occurred. Print Done