Homework Answers
| Item | Amount | |
| Number of units sold | 1,280,000 / 80 = | 16000 |
| Variable sales and administrative cost per unit | 240,000 /16000 = | $15 |
| Number of units manufactured | 16000 + 4000 = | 20000 |
| Variable cost of goods manufactured per unit | 600000 / 20000 = | $30 |
| Fixed manufacturing cost per unit | (840000-600000)/20000 = | $12 |
| 10,000 addtional | 10,000 addtional | |||
| Original Absorption | Original Variable | Absorption | Variable | |
| Net income | 303000 | 255000 | 367000 | 255000 |
working note:
| The variable net income will not change as this is based on | ||
| variable costing, and sales units are the same under both the | ||
| production levels. | ||
| Additional 10,000 units of production | ||
| New production units | 30000 | |
| Total fixed manufacturing overheads | 240000 | |
| Fixed manufacturing overhead per unit | 8 | |
| Ending inventory (30,000 - 16,000) | 14000 | |
| Fixed manufacturing costs in ending inventory | 112000 | |
| Net income under absorption costing (255000 +112,000) | 367000 | |
2.
Net change in operating income from producing 10000 units additional in absorption costing = $64000
3.
Net change in operating income from producing 10000 units additional in variable costing = $0
4.
Recommendation is a - do not produce extra units
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