Problem 19-8A Dilithium Batteries is a division of Enterprise Corporation. The d
ID: 2569273 • Letter: P
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 $34 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 Selling price per unit Variable manufacturing costs per unit Fixed manufacturing overhead costs (total) Fixed manufacturing overhead costs per unit: 60,000 $34 $14 $540,000 Based on 60,000 units Based on 90,000 units Manufacturing cost per unit: Based on 60,000 units Based on 90,000 units $9 per unit ($540,000 ÷ 60,000) $6 per unit ($540,000 ÷ 90,000) $23 per unit ($14 variable $9 fixed) $20 per unit ($14 variable + $6 fixed) $3 Variable selling and administrative expenses Fixed selling and administrative expenses (total) $50,000Explanation / Answer
DILITHIUM BATTERIES DIVISION
INCOME STATEMENT UNDER ABSORPTION COSTING
PARTICULARS
60000
PRODUCED
90000
PRODUCED
SALES ($ 34 PER UNIT)
$ 20,40,000
$ 30,60,000
LESS : COST OF GOODS SOLD
(WORKING NOTE)
($ 13,80,000)
($ 18,00,000)
GROSS PROFIT
$6,60,000
$12,60,000
LESS : VARIABLE SELLING AND ADMINISTRATIVE EXPENSES($3 PER UNIT)
($1,80,000)
($2,70,000)
LESS : FIXED SELLING AND ADMINISTRATIVE EXPENSES
($50,000)
($50,000)
NET INCOME
$4,30,000
$9,40,000
WORKING NOTE : CALCULATION OF COST OF GOODS SOLD:
PARTICULARS 60000 PRODUCED 90000 PRODUCED
VARIABLE MANUFACTURING COSTS($14 PER UNIT) $8,40,000 $12,60,000
FIXED MANUFACTURING OVERHEAD COSTS $5,40,000 $ 5,40,000
COST OF GOODS SOLD $ 13,80,000 $ 18,00,000
DILITHIUM BATTERIES DIVISION
INCOME STATEMENT UNDER VARIABLE COSTING
PARTICULARS
60000 PRODUCED
90000 PRODUCED
SALES
LESS : VARIABLE MANUFACTURING COSTS($14 PER UNIT)
$20,40,000
($8,40,000)
$30,60,000
($12,60,000)
VARIABLE MANUFACTURING MARGIN
LESS: VARIABLE SELLING AND ADMINISTARATION EXPENSES ( $3 PER UNIT)
$12,00,000
($1,80,000)
$18,00,000
($2,70,000)
CONTRIBUTION MARGIN
LESS : FIXED MANUFACTURING OVERHEAD COSTS
LESS: FIXED SELLING AND ADMINISTRATION EXPENSES
$10,20,000
($5,40,000)
($50,000)
$15,30,000
($5,40,000)
($50,000)
NET INCOME
$4,30,000
$9,40,000
PARTICULARS
60000
PRODUCED
90000
PRODUCED
SALES ($ 34 PER UNIT)
$ 20,40,000
$ 30,60,000
LESS : COST OF GOODS SOLD
(WORKING NOTE)
($ 13,80,000)
($ 18,00,000)
GROSS PROFIT
$6,60,000
$12,60,000
LESS : VARIABLE SELLING AND ADMINISTRATIVE EXPENSES($3 PER UNIT)
($1,80,000)
($2,70,000)
LESS : FIXED SELLING AND ADMINISTRATIVE EXPENSES
($50,000)
($50,000)
NET INCOME
$4,30,000
$9,40,000