ABC Pumps is a division of ABC Controls The division manufactures and sells a pump in a variety of applications. During the coming year, it projects the following sales: 25,000 units $17 per unit The manager is considering producing either this level or 10,000 units more. The following information is available to help in the decision: 0 Beginning Inventory $25,000 Expected Sales $17.00 Expected Sales Price per Unit $6.00 Variable Manufacturing Cost per Unit $140,000 Total Fixed Manufacturing Overhead $5.60 Fixed Manufacturing Costs $4.00 Fixed Manufacturing Costs (Plus 10,000 Units) t $11.60 Total Manufacturing Costs Including Fixed $10.00 Total Manufacturing Costs Including Fixed (Plus 10,000 Units) $37,000 Selling and Admin Costs (All Fixed) Instructions A. Prepare an absorption costing income statement showing results for both levels of production. B. Why is income different for the two production levels when the sales levels are the same, either way?
ABC Pumps is a division of ABC Controls The division manufactures and sells a pump in a variety of applications. During the coming year, it projects the following sales: 25,000 units $17 per unit The manager is considering producing either this level or 10,000 units more. The following information is available to help in the decision: 0 Beginning Inventory $25,000 Expected Sales $17.00 Expected Sales Price per Unit $6.00 Variable Manufacturing Cost per Unit $140,000 Total Fixed Manufacturing Overhead $5.60 Fixed Manufacturing Costs $4.00 Fixed Manufacturing Costs (Plus 10,000 Units) t $11.60 Total Manufacturing Costs Including Fixed $10.00 Total Manufacturing Costs Including Fixed (Plus 10,000 Units) $37,000 Selling and Admin Costs (All Fixed) Instructions A. Prepare an absorption costing income statement showing results for both levels of production. B. Why is income different for the two production levels when the sales levels are the same, either way?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
76.
Subject : - Accounting
Transcribed Image Text:ABC Pumps is a division of ABC Controls. The division manufactures and sells a pump in a variety of applications.
During the coming year, it projects the following sales:
25,000 units
$17 per unit
The manager is considering producing either this level or 10,000 units more.
The following information is available to help in the decision:
0 Beginning Inventory
$25,000 Expected Sales
$17.00 Expected Sales Price per Unit
$6.00 Variable Manufacturing Cost per Unit
$140,000 Total Fixed Manufacturing Overhead
$5.60 Fixed Manufacturing Costs
$4.00 Fixed Manufacturing Costs (Plus 10,000 Units)
to
$11.60 Total Manufacturing Costs Including Fixed
$10.00 Total Manufacturing Costs Including Fixed (Plus 10,000 Units)
$37,000 Selling and Admin Costs (All Fixed)
Instructions
A. Prepare an absorption costing income statement showing results for both levels of production.
B. Why is income different for the two production levels when the sales levels are the same, either way?
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