Kerwin Company uses standard costing. Tim Sesnie , the new president of Kerwin Company, is presented with the following data for 2017

Requirement 1 At what percentage of denominator level was the plant operating during

2017 ? Fill out the black

Determine the formula, then compute at what percentage of denominator level the plant was operating during 2017. (Abbreviation used: "mfg" = manufacturing.)

--------------------------------/------------------------------------ = %of denominator level

------------------------------/-------------------------------------- = __________ %

Requirement 2 How much-fixed manufacturing overhead was included in the 2016 and the 2017 ending inventory under absorption costing?

Requirement 3: Reconcile and explain the difference in 20172017 operating incomes under variable and absorption costing.

Requirement4: Tim Sesnie is concerned: He notes that despite an increase in sales over 2016, 2017 operating income has actually declined under absorption costing. Explain how this occurred.

Date table

Kerwin Company

Income statements for the Year Ended December 31, 2017

Variable Absorption

costing Costing

Revenue $ 8,800,000 $ 8,800,000

Cost of goods sold (at standard cost) 4,700,000 5,875,000

Fixed manufacturing overhead(budgeted) 1,500,000 -------

Fixed manufacturing overhead variances (all unfavorable)

Spending 120,000 120,000

Production volume --- 390,000

Total marketing and administration cost (all fixed) 1,575,000 1,575,000

Total cost 7,895,000 7960,000

operating income $905,000 $840,000

Investing (at standard cost)

December 31, 2016 $1495,000 $1,715,000

December 31 2017 40,000 195,000