Cutting Edge Corp. produces sporting equipment. In 2012, thefirst year of operations, Cutting Edge produced 25,000 units andsold 20,000 units. In 2013, the production and sales results wereexactly reversed. In each year, selling price was $100, variablemanufacturing costs were $40 per unit, variable selling expenseswere $8 per unit, fixed manufacturing costs were $540,000, andfixed administrative expenses were $200,000.
Cutting Edge Corp. produces sporting equipment. In 2012, thefirst year of operations, Cutting Edge produced 25,000 units andsold 20,000 units. In 2013, the production and sales results wereexactly reversed. In each year, selling price was $100, variablemanufacturing costs were $40 per unit, variable selling expenseswere $8 per unit, fixed manufacturing costs were $540,000, andfixed administrative expenses were $200,000.
Related questions
Dilithium Batteries is a division of Enterprise Corporation. Thedivision manufactures and sells a long-life battery used in a widevariety of applications. During the coming year, it expects to sell60,000 units for $31 per unit. Nyota Uthura is the divisionmanager. She is considering producing either 60,000 or 90,000 unitsduring the period. Other information is presented in theschedule.
| Division Information for 2017 | |||
| Beginning inventory | 0 | ||
| Expected sales in units | 60,000 | ||
| Selling price per unit | $31 | ||
| Variable manufacturing costs per unit | $13 | ||
| 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 | $22 | per unit ($13 variable + $9 fixed) | |
| Based on 90,000 units | $19 | per unit ($13 variable + $6 fixed) | |
| Variable selling and administrative expenses | $2 | ||
| Fixed selling and administrative expenses (total) | $50,000 |
a) Prepare an absorption costing income statement, with onecolumn showing the results if 60,000 units are produced and onecolumn showing the results if 90,000 units are produced.
b)Prepare a variable costing income statement, with one columnshowing the results if 60,000 units are produced and one columnshowing the results if 90,000 units are produced.
3. Osawa, Inc.planned and actually produced 200,000 units of product in 2012, itsfirst year of operations. Variable manufacturing cost were $30 perunit. Planned and actual fixed manufacturing costs were $600,000and selling and administrative expenses were $400,000. Osawa sold120,000 units of product for $40 per unit. What is Osawa%u2019s net income according to GAAP? What is Osawa%u2019s net income using variable costing? Explain the difference, if any, in net income? |
