Question
In: Accounting
Carlos Cavalas, the manager of Echo Products’ Brazilian Division, is trying to set the production schedule...
Carlos Cavalas, the manager of Echo Products’ Brazilian Division, is trying to set the production schedule for the last quarter of the year. The Brazilian Division had planned to sell 70,070 units during the year, but by September 30 only the following activity had been reported:
| Units | |
| Inventory, January 1 | 0 |
| Production | 72,500 |
| Sales | 63,700 |
| Inventory, September 30 | 8,800 |
The division can rent warehouse space to store up to 29,500 units. The minimum inventory level that the division should carry is 2,300 units. Mr. Cavalas is aware that production must be at least 5,280 units per quarter in order to retain a nucleus of key employees. Maximum production capacity is 44,800 units per quarter.
Demand has been soft, and the sales forecast for the last quarter is only 20,700 units. Due to the nature of the division’s operations, fixed manufacturing overhead is a major element of product cost.
Required:
1a. Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year?
1b. Will the number of units scheduled for production affect the division’s reported income or loss for the year?
2. Assume that the division is using absorption costing and that the divisional manager is given an annual bonus based on divisional operating income. If Mr. Cavalas wants to maximize his division’s operating income for the year, how many units should be scheduled for production during the last quarter?
Solutions
ekkarill92 answered 1 year agoRelated Solutions
Carlos Cavalas, the manager of Echo Products’ Brazilian Division, is trying to set the production schedule...
Carlos Cavalas, the manager of Echo Products’ Brazilian
Division, is trying to set the production schedule for the last
quarter of the year. The Brazilian Division had planned to sell
68,090 units during the year, but by September 30 only the
following activity had been reported:
Units
Inventory, January 1
0
Production
73,700
Sales
61,900
Inventory, September 30
11,800
The division can rent warehouse space to store up to 29,100
units. The minimum inventory level that the division should carry...
Carlos Cavalas, the manager of Echo Products’ Brazilian Division, is trying to set the production schedule...
Carlos Cavalas, the manager of Echo Products’ Brazilian
Division, is trying to set the production schedule for the last
quarter of the year. The Brazilian Division had planned to sell
68,420 units during the year, but by September 30 only the
following activity had been reported:
Units
Inventory, January 1
0
Production
73,400
Sales
62,200
Inventory, September 30
11,200
The division can rent warehouse space to store up to 30,200
units. The minimum inventory level that the division should carry...
Carlos Cavalas, the manager of Echo Products’ Brazilian Division, is trying to set the production schedule...
Carlos Cavalas, the manager of Echo Products’ Brazilian
Division, is trying to set the production schedule for the last
quarter of the year. The Brazilian Division had planned to sell
3,600 units during the year, but by September 30 only the following
activity had been reported:
Units
Inventory, January 1
0
Production
2,400
Sales
2,000
Inventory, September 30
400
The division can rent warehouse space to store up to 1,000
units. The minimum inventory level that the division should carry...
Carlos Cavalas, the manager of Echo Products’ Brazilian Division, is trying to set the production schedule...
Carlos Cavalas, the manager of Echo Products’ Brazilian
Division, is trying to set the production schedule for the last
quarter of the year. The Brazilian Division had planned to sell
67,430 units during the year, but by September 30 only the
following activity had been reported:
Units
Inventory, January
1
0
Production
72,500
Sales
61,300
Inventory, September 30
11,200
The division can rent warehouse space to store up to 30,600
units. The minimum inventory level that the division should carry...
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2
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1200
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