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Chenango Can Company Absorption Costing Income Statement For the Year Ended Fixed Manufacturing OH 455000 Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 Actual Production 91000 Sales 2730000 1875000 3157500 91000*30 62500*30 105250*30 Fixed Manufacturing OH PU 5.00 Less: Cost of Goods Sold Direct Material 728000 500000 842000 91000*8 62500*8 105250*8 Direct Labor 227500 156250 263125 91000*2.5 62500*2.5 105250*2.5 Variable M.OH 682500 468750 789375 91000*7.5 62500*7.5 105250*7.5 Fixed M.OH 455000 312500 526250 91000*5 62500*5 105250*5 Contribution Margin 637000 437500 736750 Less: Variable S&A Ex 36400 25000 42100 91000*0.4 62500*0.4 105250*0.4 Less: Fixed S&A Ex 46000 46000 46000 Net Operating Income 554600 366500 648650 Chenango Can Company Variable Costing Income Statement For the Year Ended Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 Sales 2730000 1875000 3157500 91000*30 62500*30 105250*30 Less: Cost of Goods Sold Direct Material 728000 500000 842000 91000*8 62500*8 105250*8 Direct Labor 227500 156250 263125 91000*2.5 62500*2.5 105250*2.5 Variable M.OH 682500 468750 789375 91000*7.5 62500*7.5 105250*7.5 Variable S&A Ex 36400 25000 42100 91000*0.4 62500*0.4 105250*0.4 Contribution Margin 1055600 725000 1220900 Less: Fixed M.OH 455000 455000 455000 Less: Fixed S&A Ex 46000 46000 46000 Net Operating Income 554600 224000 719900 Reconciliation of VC to AC: Year 1 Year 2 Year 3 Year 2 Year 3 Net Operating Income-AC 554600 366500 648650 Less: Fixed M.OH Deferred in Closing Units 0 142500 71250 28500*5 14250*5 Add: Fixed M.OH Deferred in Opening Units 0 0 142500 28500*5 Net Operating Income-VC 554600 224000 719900 3 There will be no difference since there is no impact of Inventory(Opening or Closing) Total Operating Income will be same under Absorption and Variable Costing
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