Problem 19-8A Dilithium Batteries is a division of Enterprise Corporation. The d

Question

Problem 19-8A 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 Expected sales in units 60,000 $31 $15 $540,000 Selling price per unit Variable manufacturing costs per unit Fixed manufacturing overhead costs (total) Fixed manufacturing overhead costs per unit: $9 per unit ($540,000 ÷ 60,000) $6 per unit ($540,000 ÷ 90,000) Based on 60,000 units Based on 90,000 units Manufacturing cost per unit: Based on 60,000 units Based on 90,000 units $24 per unit ($15 variable $9 fixed) $21 per unit ($15 variable $6 fixed) Variable selling and administrative expenses Fixed selling and administrative expenses (total) $2 $50,000

Explanation / Answer

Dilithium Batteries Division Income Statement For the Year Ended 2017 Absorption Costing 60,000 Produced 90,000 Produced Sales                     1,860,000                        2,790,000 (60,000 Nos X $31) (90,000 Nos X $31) Cost of Goods Sold                     1,440,000                        1,890,000 (60,000 Nos X $24) (90,000 Nos X $21) Gross Margin                         420,000                            900,000 Selling & Administrative Expenses Variable                         120,000                            180,000 (60,000 Nos X $2) (90,000 Nos X $2) Fixed                           50,000                              50,000 Total Selling & Administrative Expenses                         170,000                            230,000 Net Operating Margin                         250,000                            670,000 Dilithium Batteries Division Income Statement For the Year Ended 2017 Variable Costing 60,000 Produced 90,000 Produced Sales                     1,860,000                        2,790,000 (60,000 Nos X $31) (90,000 Nos X $31) Less: Variable Costs: Manufacturing Costs                         900,000                        1,350,000 (60,000 Nos X $15) (90,000 Nos X $15) Selling & Administrative Expenses                         120,000                            180,000 (60,000 Nos X $2) (90,000 Nos X $2) Total Variable Expenses                     1,020,000                        1,530,000 Contribution                         840,000                        1,260,000 Less: Fixed Costs: Manufacturing Costs                         540,000                            540,000 Selling & Administrative Expenses                           50,000                              50,000 Total Fixed Costs                         590,000                            590,000 Net Operating Income                         250,000                            670,000

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