Osawa Inc planned and actually manufactured 260000 units of

Osawa, Inc., planned and actually manufactured 260,000 units of its single product in2017 , its first year of operation. Variable manufacturing cost was $26 per unit produced. Variable operating (nonmanufacturing) cost was $11 per unit sold. Planned and actual fixed manufacturing costs were $ 520,000. Planned and actual fixed operating (nonmanufacturing) costs totaled $ 370000. Osawa sold 180,000 units of product at $ 44 per unit.

Requirement 1. Osawa \'s 2017 operating income using absorption costing is (a) $ 530,000 , (b) $ 370,000 , (c) $ 740,000 , (d) $900,000, or (e) none of these. Show supporting calculations.

Begin by selecting the labels used in the absorption costing calculation of operating income and enter the supporting amounts. (For amounts with a $0 balance, make sure to enter \"0\" in the appropriate cell.) calculations.

2.requirement Osawa \'s 2017operating income using variable costing is (a) $ 890,000 , (b) $ 530,000 , (c) $ 370,000 , (d) $ 740,000 , or (e) none of these. Show supporting calculations.

Solution

1. Osawa \'s 2017 operating income using absorption costing is

Solution: (a) $ 530,000

Working:

Revenues

7,920,000

COGS

Variable manufacturing costs

4,680,000

Allocated fixed manufacturing costs

360,000

5,040,000

Gross margin

2,880,000

Operating costs

Variable operating

1,980,000

Fixed operating

370,000

2,350,000

Operating income

530,000

2) Osawa \'s 2017operating income using variable costing is

Solution: 370,000

Working:

Revenues

7,920,000

Variable costs

Variable manufacturing costs

4,680,000

Variable operating costs

1,980,000

6,660,000

Contribtion margin

1,260,000

Fixed Costs

Fixed manufacturing costs

520,000

Fixed operating costs

370,000

890,000

Operating income

370,000