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? Req 1A Req 1B Reqd 2 Req Req 3B Prepare operating income statements for Chataqua Can Company for its first three years of operations using absorption costing. Year 1 Year 2 Year 3 Sales revenue Less: Cost of goods sold Gross margin Selling and Administrative Expenses Variable selling and administrative $ 0 $ 0 $ Fixed selling and administrative Operating income $ 0 % 0 % 0 Req 1A Req 1B Reqd 2 Req 3A 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 Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Operating income $ 0 $ 0 % 0 Req 1A Req 1B Reqd 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 Change in inventory (in units) Predetermined fixed overhead rate Difference in fixed overhead expensed under absorption and variable costing 3 Reg 1A Req 1B Reqd 2 Req Req 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 Req 1A Req 1B Reqd 2 Req Req 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 relationship between total operating income for the four-year period as reported under absorption and variable costing? Total operating income will be higher under variable costing. Total operating income will be higher under absorption costing. Total operating income will be same under absorption and variable costing. 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? Req 1A Req 1B Reqd 2 Req Req 3B Prepare operating income statements for Chataqua Can Company for its first three years of operations using absorption costing. Year 1 Year 2 Year 3 Sales revenue Less: Cost of goods sold Gross margin Selling and Administrative Expenses Variable selling and administrative $ 0 $ 0 $ Fixed selling and administrative Operating income $ 0 % 0 % 0 Req 1A Req 1B Reqd 2 Req 3A 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 Fixed expenses: Fixed manufacturing overhead Fixed selling and administrative Operating income $ 0 $ 0 % 0 Req 1A Req 1B Reqd 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 Change in inventory (in units) Predetermined fixed overhead rate Difference in fixed overhead expensed under absorption and variable costing 3 Reg 1A Req 1B Reqd 2 Req Req 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 Req 1A Req 1B Reqd 2 Req Req 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 relationship between total operating income for the four-year period as reported under absorption and variable costing? Total operating income will be higher under variable costing. Total operating income will be higher under absorption costing. Total operating income will be same under absorption and variable costing.
