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ACC - Chenago Can Company Problem




Question;Questions:Chenago 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????????????????????.$7.50Direct Labor????????????????????..?$2.50Variable manufacturing overhead?????????..$6.00Total variable manufacturing cost per case is??. $10.00Variable selling and administrative costs amount to $.50/case. Budgeted and fixed manufacturing over-head is $400,000.00/yr., and fixed selling and administrative cost is #37,500.00/yr. The following data pertain to the company?s first three years of operation. (A unit refers to one case of cans). YEAR1 YEAR2 YEAR3Planned production (in units)????????????80,000 80,000 80,000Finished-goods inventory (in units), January 1??.. 0 0 0Actual production (in units)?????????????80,000 80,000 80,000Sales (in units)????????????????????.80,000 60,000 90,000Finished goods inventory (in units), December 31.. 0 20,000 10,000 *Actual costs were the same as the budgeted costs1.Prepare Operating and income statements for Chenago Can Company for its first three years of operation using:a.Absorption Costingb.Variable Costing2.Reconcile Chenago 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 Chenago?s fourth year of operation actual production equals planned production, actual costs are equal to budgeted costs, and the company ends the year with no inventory on hand.a. What will be the difference between absorption-costing operating income and variable-costing operating 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? Explain.


Paper#40413 | Written in 18-Jul-2015

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