Question

The following information applies to the questions displayed below.] Diego Company manufactures one product that is sold for $77 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 59,000 units and sold 54,000 units.   Variable costs per unit:      Manufacturing:         Direct materials $ 27            Direct labor $ 10            Variable manufacturing overhead $ 2            Variable selling and administrative $ 3      Fixed costs per year:      Fixed manufacturing overhead $ 1,298,000         Fixed selling and administrative expenses $ 662,000    The company sold 41,000 units in the East region and 13,000 units in the West region. It determined that $330,000 of its fixed selling and administrative expenses is traceable to the West region, $280,000 is traceable to the East region, and the remaining $52,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. 1a. If the sales volumes in the East and West regions had been reversed, what would be the company’s overall break-even point in unit sales? 1b. What would have been the company’s variable costing net operating income (loss) if it had produced and sold 54,000 units? 1c. What would have been the company’s absorption costing net operating income (loss) if it had produced and sold 54,000 units? 1d. If the company produces 5,000 fewer units than it sells in its second year of operations, will absorption costing net operating income be higher or lower than variable costing net operating income in Year 2? 2. Hatfield Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price	$195
Units in beginning inventory	0
Units produced	1,950
Units sold	830
Units in ending inventory	1,120
Variable costs per unit:
Direct materials	$100
Direct labor	$35
Variable manufacturing overhead	$4
Variable selling and administrative	$15
Fixed costs:
Fixed manufacturing overhead	$25,350
Fixed selling and administrative	$11,620

What is the total period cost for the month under the variable costing?

Answer 1