Prepare an absorption costing income statement

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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 55,000 units for $34 per unit. Nyota Uthura is the division manager. She is considering producing either 55,000 or 88,000 units during the period.

Division Information for 2014

Beginning inventory

0

Expected sales in units

55,000

Selling price per unit

$34

Variable manufacturing costs per unit

$14

Fixed manufacturing overhead costs (total)

$440,000

Fixed manufacturing overhead costs per unit:

 

Based on 55,000 units

$8 per unit ($440,000/55,000)

Based on 88,000 units

$5 per unit ($440,000/88,000)

Manufacturing cost per unit:

 

Based on 55,000 units

$22 per unit ($14 variable + $8 fixed)

Based on 88,000 units

$19 per unit ($14 variable + $5 fixed)

Variable and administrative expenses

$2

Fixed selling and administrative expenses (total)

$42,900

Prepare an absorption costing income statement, with one column showing the result if 55,000 units are produced and one column showing the results if 88,000 units are produced.

Reference no: EM13861281

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