Reference no: EM132510526

Basic Electric Motors is a division of Basic Electric Products Corporation. The division manufactures and sells an electric switch used in a wide variety of applications. During the coming year, it expects to sell 220,000 units for $8 per unit. Ester Madden is the division manager. She is considering producing either 220,000 or 270,000 units during the period.

Division Information for 2020

Beginning inventory                                         0
Expected sales in units                                  220,000
Selling price per unit                                          $8
Variable manufacturing cost per unit                   $2.70
Fixed manufacturing cost (total)                           $594,000
Fixed manufacturing overhead costs per unit
Based on                                                       220,000 units
$2.70 per unit ($594,000 : 220,000)
Based on                                                       270,000 units
$2.20 per unit ($594,000 : 270,000)
Manufacturing cost per unit
Based on                                                      220,000 units
$5.40 per unit ($2.70 variable + $2.70 fixed)
Based on                                                      270,000 units
$4.90 per unit ($2.70 variable + $2.20 fixed)
Variable selling and administrative expenses                 $0.50 per unit
Fixed selling and administrative expenses (total)                  $11,900

Question 1: Make an absorption-costing income statement, with one column showing the results if 220,000 units are produced and one column showing the results if 270,000 units are produced and a variable-costing income statement.