Chapter 9, Problem 9.35P

Comparison of variable costing and absorption costing. Gammaro Company uses standard costing. Tim Sweeney, the new president of Gammaro Company, is presented with the following data for 2017:

1. 1. At what percentage of denominator level was the plant operating during 2017?
2. 2. How much fixed manufacturing overhead was included in the 2016 and the 2017 ending inventory under absorption costing?
3. 3. Reconcile and explain the difference in 2017 operating incomes under variable and absorption costing.
4. 4. Tim Sweeney 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.