Problem 8-38 Variable Costing and Absorption Costing Income Statements; Reconciling Reported Operating Income (LO 8-2, 8-3, 8-4) Chataqua Can Company manufactures metal cans used in the food-processing industry. A case of cans sells for $25. The variable costs of production for one case of cans are as follows: Direct material Direct labor Variable manufacturing overhead Total variable manufacturing cost per case $ 6.50 1.50 6.00 $ 14.00 Variable selling and administrative costs amount to $0.70 per case. Budgeted fixed manufacturing overhead is $492,000 per year, and fixed selling and administrative cost is $41,500 per year. The following data pertain to the company's first three years of operation. Planned production (in units) Finished-goods inventory (in units), January 1 Actual production (in units) Sales (in units) Finished-goods inventory (in units), December 31 Year 1 82,000 0 82,000 82,000 Year 2 82,000 0 82,000 58,000 24,000 Year 3 82,000 24,000 82,000 94,000 12,000 Actual cos were the same as budgeted costs. Required: 1. Prepare operating income statements for Chataqua Can Company for its first three years of operations using: a. Absorption costing. b. Variable costing. 2. Reconcile Chataqua Can Company's operating income reported under absorption and variable costing for each of its first three years of operation. Use the shortcut method. 3. Suppose that during Chataqua's fourth year of operation actual production equals planned production, actual costs are as expected, and the company ends the year with no inventory on hand. a. What will be the difference between absorption-costing income and variable-costing income in year 4? b. What will be the relationship between total operating income for the four-year period as reported under absorption and variable costing? Chapter 8 i Saved 4 ALLUCI LUSS WCIELIIC SONIC OS LIIc vuuycucu LUSLS. 1 points Required: 1. Prepare operating income statements for Chataqua Can Company for its first three years of operations using: a. Absorption costing. b. Variable costing. 2. Reconcile Chataqua Can Company's operating income reported under absorption and variable costing for each of its first three years of operation. Use the shortcut method. 3. Suppose that during Chataqua's fourth year of operation actual production equals planned production, actual costs are as expected, and the company ends the year with no inventory on hand. a. What will be the difference between absorption-costing income and variable-costing income in year 4? b. What will be the relationship between total operating income for the four-year period as reported under absorption and variable costing? eBook Print Complete this question by entering your answers in the tabs below. References Reg 1A Reg 1B Reg 2 Req Req 3B Prepare operating income statements for Chataqua Can Company for its first three years of operations using absorption costing Year 2 $ 1,450,000 Year 3 2,350,000 $ $ Sales revenue Less: Cost of goods sold Gross margin Selling and Administrative Expenses Variable selling and administrative Year 1 2,050,000 1,640,000 410,000 $ $ 1,450,000 $ 2,350,000 57,400 40,600 65,800 Fixed selling and administrative Operating income $ $ 41,500 $ 311,100 $ 41,500 $ 1,367,900 $ 41,500 2,242,700 Required: 1. Prepare operating income statements for Chataqua Can Company for its first three years of operations using: a. Absorption costing. b. Variable costing. 2. Reconcile Chataqua Can Company's operating income reported under absorption and variable costing for each of its first three years of operation. Use the shortcut method. 3. Suppose that during Chataqua's fourth year of operation actual production equals planned production, actual costs are as expected, and the company ends the year with no inventory on hand. a. What will be the difference between absorption-costing income and variable-costing income in year 4? b. What will be the relationship between total operating income for the four-year period as reported under absorption and variable costing? Complete this question by entering your answers in the tabs below. ces Reg 1A Reg 1B Reg 2 Req Req 3B Prepare operating income statements for Chataqua Can Company for its first three years of operations using variable costing. Year 1 Year 2 Year 3 Sales revenue Variable expenses Variable manufacturing costs Variable selling and administrative $ 0 $ 0 $ 0 Contribution margin Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Operating income $ 0$ 0 $ 0 ALLUCI LUSLS WCICLIC SONIC OS Liec wuuycucu LUSLS. Required: 1. Prepare operating income statements for Chataqua Can Company for its first three years of operations using: a. Absorption costing. b. Variable costing. 2. Reconcile Chataqua Can Company's operating income reported under absorption and variable costing for each of its first three years of operation. Use the shortcut method. 3. Suppose that during Chataqua's fourth year of operation actual production equals planned production, actual costs are as expected, and the company ends the year with no inventory on hand. a. What will be the difference between absorption-costing income and variable-costing income in year 4? b. What will be the relationship between total operating income for the four-year period as reported under absorption and variable costing? Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Reg 2 Req 3A Req 3B Reconcile Chataqua Can Company's operating income reported under absorption and variable costing for each of its first three years of operation. Use the shortcut method. Year fixed Change in inventory in units) Predetermined fixed overhead rate Difference overhead expensed under absorption and variable costing 1 2 3 82,000 82,00 4 Piannea proauction (in units) Finished-goods inventory (in units), January 1 Actual production (in units) Sales (in units) Finished-goods inventory (in units), December 31 82,000 82,000 82,000 58,000 24,000 82,000 24,000 82,000 94,000 12,000 nts Actual costs were the same as the budgeted costs. eBook Required: 1. Prepare operating income statements for Chataqua Can Company for its first three years of operations using: a. Absorption costing. b. Variable costing. 2. Reconcile Chataqua Can Company's operating income reported under absorption and variable costing for each of its first three years of operation. Use the shortcut method. 3. Suppose that during Chataqua's fourth year of operation actual production equals planned production, actual costs are as expected, and the company ends the year with no inventory on hand. a. What will be the difference between absorption-costing income and variable-costing income in year 4? b. What will be the relationship between total operating income for the four-year period as reported under absorption and variable costing? Print Ceferences Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Reg 2 Reg Reg 3B Suppose that during Chataqua's fourth year of operation actual production equals planned production, actual costs are as expected, and the company ends the year with no inventory on hand. What will be the difference between absorption-costing income and variable-costing income in year 4? Difference in reported income