Question

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 60,000 units for $32 per unit. Nyota Uthura is the division manager. She is considering producing either 60,000 or 90,000 units during the period. Other information is presented in the schedule.

Division Information for 2020
Beginning inventory		0
Expected sales in units		60,000
Selling price per unit		$32
Variable manufacturing costs per unit		$16
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		$25	per unit ($16 variable + $9 fixed)
Based on 90,000 units		$22	per unit ($16 variable + $6 fixed)
Variable selling and administrative expenses		$4
Fixed selling and administrative expenses (total)		$50,000

(b)

Prepare a variable costing income statement, with one column showing the results if 60,000 units are produced and one column showing the results if 90,000 units are produced.

Answer 1