Division Information for 2017 Prepare an absorption costing income statement, wi
ID: 2475076 • Letter: D
Question
Division Information for 2017
Prepare an absorption costing income statement, with one column showing the results if 60,000 units are produced and one column showing the results if 90,000 units are produced.
Dilithium Batteries is a division of Enterprise Corporation. The division manufactures and sells a long-life battery used in a wide variety of applications. During the coming year, it expects to sell 60,000 units for $31 per unit. Nyota Uthura is the division manager. She is considering producing either 60,000 or 90,000 units during the period. Other information is presented in the schedule.Division Information for 2017
Beginning inventory 0 Expected sales in units 60,000 Selling price per unit $31 Variable manufacturing costs per unit $14 Fixed manufacturing overhead costs (total) $540,000 Fixed manufacturing overhead costs per unit: Based on 60,000 units $9 per unit ($540,000 ÷ 60,000) Based on 90,000 units $6 per unit ($540,000 ÷ 90,000) Manufacturing cost per unit: Based on 60,000 units $23 per unit ($14 variable + $9 fixed) Based on 90,000 units $20 per unit ($14 variable + $6 fixed) Variable selling and administrative expenses $4 Fixed selling and administrative expenses (total) $50,000Explanation / Answer
Absorption costing Income statement Production 60000 UNITS 90000 UNITS Sales (60000 units * $31) $18,60,000 $18,60,000 Less : Cost of goods sold Beginning Inventory $0 $0 Cost of goods manufactured - 60000 units * $23 $13,80,000 - 90000 units * $20 $18,00,000 Cost of goods available for sale $13,80,000 $18,00,000 Less : Closing inventory (30000 units * $20) $0 $13,80,000 $6,00,000 $12,00,000 Gross Profit $4,80,000 $6,60,000 Less : Selling & admin exp. - Variable exp. ($4 *60000 units) $2,40,000 $2,40,000 - Fixed exp. $50,000 $50,000 Net Operating Income $1,90,000 $3,70,000