Carlos Cavalas, the manager of Echo Products' Brazilian Division, is trying to set the production schedule for the lastquarter of the year. The Brazilian Division had planned to sell 69,850 units during the year, but by September 30 only thefollowing activity had been reported:Inventory, January 1ProductionSalesInventory, September 30The division can rent warehouse space to store up to 30,700 units. The minimum inventory level that the division shouldcarry is 2,300 units. Mr. Cavalas is aware that production must be at least 5,940 units per quarter in order to retain anucleus of key employees. Maximum production capacity is 45,700 units per quarter.Demand has been soft, and the sales forecast for the last quarter is only 20,900 units. Due to the nature of the division'soperations, fixed manufacturing overhead is a major element of product cost.Required productionRequired:1-a. Assume that the division is using variable costing. How many units should be scheduled for production during the lastquarter of the year?YesO NoUnitsunits073,40063,5009,9001-b. Will the number of units scheduled for production affect the division's reported income or loss for the year?Required production2. Assume that the division is using absorption costing and that the divisional manager is given an annual bonus basedon divisional operating income. If Mr. Cavalas wants to maximize his division's operating income for the year, how manyunits should be scheduled for production during the last quarter?units

1-a. Variable Costing - Required Production Units:To determine the required production units using…

1-a. Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year? Required production units 1-b. Will the number of units scheduled for production affect the division's reported income or loss for the year? Yes O No 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?

1-a. Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year? Required production units 1-b. Will the number of units scheduled for production affect the division's reported income or loss for the year? Yes O No 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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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