The Grand Rapid Corporation has two identical divisions: Westernand Northern. Their sales, production volume, and fixedmanufacturing costs have been the same for both divisions for thelast five years and are as follows:
Year 1 Year 2 Year 3 Year 4 Year 5 Units Produced 50000 50000 50000 50000 50000 Units Sold 40000 45000 55000 50000 55000 Fixed MFG Costs 250000 250000 250000 250000 250000
Western uses absorption costing and Northern uses variablecosting. Both use FIFO inventory methods. Variable manufacturingcosts are $5 per unit. Both have identical selling prices andselling and administrative expenses. There were no Year 1 beginninginventories.
Determine the difference in profits for each division for Years1 through 5. Explain why profits differ between the twodivisions.
The Grand Rapid Corporation has two identical divisions: Westernand Northern. Their sales, production volume, and fixedmanufacturing costs have been the same for both divisions for thelast five years and are as follows:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Units Produced | 50000 | 50000 | 50000 | 50000 | 50000 |
| Units Sold | 40000 | 45000 | 55000 | 50000 | 55000 |
| Fixed MFG Costs | 250000 | 250000 | 250000 | 250000 | 250000 |
Western uses absorption costing and Northern uses variablecosting. Both use FIFO inventory methods. Variable manufacturingcosts are $5 per unit. Both have identical selling prices andselling and administrative expenses. There were no Year 1 beginninginventories.
Determine the difference in profits for each division for Years1 through 5. Explain why profits differ between the twodivisions.
Related questions
The Madison Corporation has two identical divisions: Eastern and Southern. Their sales, production volume, and fixed manufacturing costs have been the same for both divisions for the last five years and that information for each are as follows:
| Year 1 | Year 2 | Year 3 | Year 4 year 5 | ||
| Units produced | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 |
| Units sold | 80,000 | 90,000 | 110,000 | 100,000 | 115,000 |
| Fixed manufacturing costs | $500,000 | $500,000 | $500,000 | $500,000 | 500,000 |
Eastern uses absorption costing and Southern uses variable costingand southern uses variable costing. Both use FIFO inventory methods. Variable manufacturing cost are $10 per unit. Both have identicals selling prices and selling and administrative expenses. There were no Year 1 beginning inventories.
Determine the difference in profits for each division for Years 1 through 5. explain why profits differ betweeen two divisions.
