Santana Rey expected sales of her line of computer workstation furniture to equa

Question

Santana Rey expected sales of her line of computer workstation furniture to equal 300 workstations (at a sales price of $3,900) for 2012. The workstations' manufacturing costs include the following. Direct materials $ 740 per unit Direct labor $ 300 per unit Variable overhead $ 70 per unit Fixed overhead $ 28,800 per year The selling expenses related to these workstations follow. Variable selling expenses $ 35 per unit Fixed selling expenses $ 4,000 per year Santana is considering how many workstations to produce in 2012. She is confident that she will be able to sell any workstations in her 2012 ending inventory during 2013. However, Santana does not want to overproduce as she does not have sufficient storage space for many more workstations. Compute Business Solutions' absorption costing income assuming. (Omit the "$" sign in your response.) a. 300 Workstations $ b. 320 Workstations $ 2. Compute Business Solutions

Explanation / Answer

1a. Absorption, 300 units

sales

1170000

direct materials

222000

direct labor

90000

variable OH

21000

fixed OH

28,800

cost of goods sold

361800

gross margin

808200

variable selling

10500

fixed selling

4,000

total selling expenses

14,500

net operating income

793,700

1b. Absorption, 320 units

sales

1170000

direct materials

222000

direct labor

90000

variable OH

21000

fixed OH

27,000

cost of goods sold

360000

gross margin

810000

variable selling

10500

fixed selling

4,000

total selling expenses

14,500

net operating income

795,500

2a. Variable costing, 300 units

sales

1170000

direct materials

222000

direct labor

90000

variable OH

21000

variable selling expenses

10500

total variable costs

343500

contribution margin

826500

fixed OH

28,800

fixed selling expenses

4,000

total fixed costs

32,800

net operating income

793,700

2b. Variable costing, 320 units

sales

1170000

direct materials

222000

direct labor

90000

variable OH

21000

variable selling expenses

10500

total variable costs

343500

contribution margin

826500

fixed OH

28,800

fixed selling expenses

4,000

total fixed costs

32,800

net operating income

793,700

1a. Absorption, 300 units

sales

1170000

direct materials

222000

direct labor

90000

variable OH

21000

fixed OH

28,800

cost of goods sold

361800

gross margin

808200

variable selling

10500

fixed selling

4,000

total selling expenses

14,500

net operating income

793,700

1b. Absorption, 320 units

sales

1170000

direct materials

222000

direct labor

90000

variable OH

21000

fixed OH

27,000

cost of goods sold

360000

gross margin

810000

variable selling

10500

fixed selling

4,000

total selling expenses

14,500

net operating income

795,500

2a. Variable costing, 300 units

sales

1170000

direct materials

222000

direct labor

90000

variable OH

21000

variable selling expenses

10500

total variable costs

343500

contribution margin

826500

fixed OH

28,800

fixed selling expenses

4,000

total fixed costs

32,800

net operating income

793,700

2b. Variable costing, 320 units

sales

1170000

direct materials

222000

direct labor

90000

variable OH

21000

variable selling expenses

10500

total variable costs

343500

contribution margin

826500

fixed OH

28,800

fixed selling expenses

4,000

total fixed costs

32,800

net operating income

793,700

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