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Carlos Cavalas, the manager of Echo Products' Brazilian Division, is trying to set the production schedule for the last quarter of the year. The Brazilian Division had planned to sell 68,420 units during the year, but by September 30 only the following activity had been reported: Inventory, January 1 Production Sales Inventory, September 30 Units 72,100 62,200 9,900 The division can rent warehouse space to store up to 30,800 units. The minimum inventory level that the division should carry is 1,600 units. Mr. Cavalas is aware that production must be at least 5,940 units per quarter in order to retain a nucleus of key employees. Maximum production capacity is 44,900 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's operations, fixed manufacturing overhead is a major element of product cost. Required: 1a. Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year? 1b. Assume that the division is using variable costing. Will the number of units scheduled for production affect the division's reported income or loss for the year?

Carlos Cavalas, the manager of Echo Products' Brazilian Division, is trying to set the production schedule for the last quarter of the year. The Brazilian Division had planned to sell 68,420 units during the year, but by September 30 only the following activity had been reported: Inventory, January 1 Production Sales Inventory, September 30 Units 72,100 62,200 9,900 The division can rent warehouse space to store up to 30,800 units. The minimum inventory level that the division should carry is 1,600 units. Mr. Cavalas is aware that production must be at least 5,940 units per quarter in order to retain a nucleus of key employees. Maximum production capacity is 44,900 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's operations, fixed manufacturing overhead is a major element of product cost. Required: 1a. Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year? 1b. Assume that the division is using variable costing. Will the number of units scheduled for production affect the division's reported income or loss for the year?

FINANCIAL ACCOUNTING
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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Carlos Cavalas, the manager of Echo Products' Brazilian Division, is trying to set the production schedule for the last quarter of the year. The Brazilian Division had planned to sell 68,420 units during the year, but by September 30 only the following activity had been reported: Inventory, January 1 Production Sales Inventory, September 30 Units 0 72,100 62,200 9,900 The division can rent warehouse space to store up to 30,800 units. The minimum inventory level that the division should carry is 1,600 units. Mr. Cavalas is aware that production must be at least 5,940 units per quarter in order to retain a nucleus of key employees. Maximum production capacity is 44,900 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's operations, fixed manufacturing overhead is a major element of product cost. Required: 1a. Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year? 1b. Assume that the division is using variable costing. Will the number of units scheduled for production affect the division's reported income or loss for the year?
Transcribed Image Text:Carlos Cavalas, the manager of Echo Products' Brazilian Division, is trying to set the production schedule for the last quarter of the year. The Brazilian Division had planned to sell 68,420 units during the year, but by September 30 only the following activity had been reported: Inventory, January 1 Production Sales Inventory, September 30 Units 0 72,100 62,200 9,900 The division can rent warehouse space to store up to 30,800 units. The minimum inventory level that the division should carry is 1,600 units. Mr. Cavalas is aware that production must be at least 5,940 units per quarter in order to retain a nucleus of key employees. Maximum production capacity is 44,900 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's operations, fixed manufacturing overhead is a major element of product cost. Required: 1a. Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year? 1b. Assume that the division is using variable costing. Will the number of units scheduled for production affect the division's reported income or loss for the year?
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