Dilithium Batteries is a division of Enterprise Corporation. The division manufa

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 $34 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 nforma Beginning inventory Expected sales in units Selling price per unit Variable manufacturing costs per unit Fixed manufacturing overhead costs (total) Fixed manufacturing overhead costs per unit: 60,000 $34 $15 $540,000 $9 per unit ($540,000 ÷ 60,000) $6 per unit ($540,000 ÷ 90,000) Based on 60,000 units Based on 90,000 units Manufacturing cost per unit: Based on 60,000 units Based on 90,000 units $24 per unit ($15 variable $9 fixed) $21 per unit ($15 variable $6 fixed) Variable selling and administrative expenses Fixed selling and administrative expenses (total) $50,000

Explanation / Answer

Solution

DILITHIUM BATTERIES DIVISON

INCOME STATEMENT

………..2017

ABSORBTION COSTING

Particular

60,000 units produced

90,000 units produced

Amount ($)

Amount ($)

Sales ($ 34 per unit)

2,040,000

3,060,000

Less: Cost of goods sold*

(1,440,000)

(1,890,000)

Gross Profit

6,00,000

1,170,000

Less: Selling and administrative expenses

Variable Selling and administrative expenses @ $ 3 per unit

(180,000)

(270,000)

Fixed Selling and administrative expenses

(50,000)

(50,000)

Operating Income

370,000

850,000

*Calculation of Cost of goods sold

Particular

60,000 units produced

90,000 units produced

Amount ($)

Amount ($)

Variable Manufacturing cost @ $ 15 per unit

9,00,000

1,350,000

Add: Fixed Manufacturing cost @ $ 9 fixed based on 60,000 units and @ $6 fixed based on 90,000 units

5,40,000

5,40,000

Cost of goods sold

1,440,000

1,890,000

Particular

60,000 units produced

90,000 units produced

Amount ($)

Amount ($)

Sales ($ 34 per unit)

2,040,000

3,060,000

Less: Cost of goods sold*

(1,440,000)

(1,890,000)

Gross Profit

6,00,000

1,170,000

Less: Selling and administrative expenses

Variable Selling and administrative expenses @ $ 3 per unit

(180,000)

(270,000)

Fixed Selling and administrative expenses

(50,000)

(50,000)

Operating Income

370,000

850,000

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