Assume That Management Has Committed to Direct Labor and Manufacturing

Essay

Assume that management has committed to direct labor and manufacturing resources sufficient to produce the planned annual production of 2,400 units.
(c) Explain the relationship between a and b above.
The following data are available for the Lawrence Manufacturing Company for the year 2007, its first year of operations:

Required:
(a) Calculate ending inventory under throughput costing, variable costing and absorption costing. Assume that management has committed to direct labor and manufacturing resources sufficient to produce the planned annual production of 2,400 units.
(b) Calculate operating income under throughput costing, variable costing and absorption costing.