Dilithium Batteries is a division of Enterprise Corporation. The division manufa
ID: 2484267 • Letter: D
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 $31 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 2017
Fixed selling and administrative expenses
(total)
$50,000
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.
Division Information for 2017
Beginning inventory 0 Expected sales in units 60,000 Selling price per unit $31 Variable manufacturing costs per unit $14 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 $23 per unit ($14 variable + $9 fixed) Based on 90,000 units $20 per unit ($14 variable + $6 fixed) Variable selling and administrative expenses $4Fixed selling and administrative expenses
(total)
$50,000
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.
Explanation / Answer
Solution:
Variable Costing Income Statement
Production Units
60,000 Units
90,000 Units
Sales Revenue (60,000 Units x $31)
$1,860,000
$1,860,000
Variable Manufacturing Cost (60000*31 / 90000*31)
$840,000
$1,260,000
Add: Beginning Inventory
$0
$0
Less: Ending Inventory (1260000*60000 / 90000)
$0
-$420,000
Variable Cost of Goods Sold
$840,000
$840,000
Variable selling and administrative expenses (60000*4)
$240,000
$240,000
Total Variable Cost
$1,080,000
$1,080,000
Contribution Margin (Sales - Total Variable Cost)
$780,000
$780,000
Fixed Cost:
Fixed manufacturing overhead costs (total)
$540,000
$540,000
Fixed selling and administrative expenses (total)
$50,000
$50,000
Total Fixed Cost
$590,000
$590,000
Operating Profit (Contribution Margin - Fixed Cost)
$190,000
$190,000
Variable Costing Income Statement
Production Units
60,000 Units
90,000 Units
Sales Revenue (60,000 Units x $31)
$1,860,000
$1,860,000
Variable Manufacturing Cost (60000*31 / 90000*31)
$840,000
$1,260,000
Add: Beginning Inventory
$0
$0
Less: Ending Inventory (1260000*60000 / 90000)
$0
-$420,000
Variable Cost of Goods Sold
$840,000
$840,000
Variable selling and administrative expenses (60000*4)
$240,000
$240,000
Total Variable Cost
$1,080,000
$1,080,000
Contribution Margin (Sales - Total Variable Cost)
$780,000
$780,000
Fixed Cost:
Fixed manufacturing overhead costs (total)
$540,000
$540,000
Fixed selling and administrative expenses (total)
$50,000
$50,000
Total Fixed Cost
$590,000
$590,000
Operating Profit (Contribution Margin - Fixed Cost)
$190,000
$190,000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.