Chataqua Can Company manufactures metal cans used in the food-processing industry. A case of cans sells for $30. The variable costs of production for one case of cans are as follows: Direct material Direct labor $ 7.00 2.00 Variable manufacturing overhead 6.50 Total variable manufacturing cost per case $15.50 Variable selling and administrative costs amount to $0.90 per case. Budgeted fixed manufacturing overhead is $540,000 per year, and fixed selling and administrative cost is $45,500 per year. The following data pertain to the company's first three years of operation. Year 1 Year 2 Year 3 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 90,000 90,000 90,000 28,000 90,000 90,000 90,000 62,000 28,000 90,000 104,000 14,000 Actual costs were the same as the 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 durina Chataaua's fourth vear of operation actual production eauals planned production. actual costs are as expected. Drov Noxt
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
![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 $30. The variable
costs of production for one case of cans are as follows:
Direct material
$ 7.00
Direct labor
2.00
6.50
Variable manufacturing overhead
Total variable manufacturing cost per case
$15.50
Variable selling and administrative costs amount to $0.90 per case. Budgeted fixed manufacturing overhead is $540,000 per year, and
fixed selling and administrative cost is $45,500 per year. The following data pertain to the company's first three years of operation.
Year 1
Year 2
Year 3
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
90,000
90,000
90,000
28,000
90,000
90,000
90,000
90,000
62,000
28,000
104,000
14,000
Actual costs were the same as the 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 durina Chataaua's fourth vear of operation actual production eauals planned production. actual costs are as expected.
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![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 expecte
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.
Req 1A
Reg 1B
Req 2
Reg 3A
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
Selling and Administrative Expenses](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1c293fbe-0ee1-4487-8ff8-96f0fca32a64%2F151cc51e-a18f-4bda-900f-234d79d4fc61%2Fmczy7s_processed.png&w=3840&q=75)
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