During the first month of operations ended June 30, 2016, Lucky Inc., has no beginning inventory and sales are estimated 20,000 units at $75 per unit. Also, sales can not be changed if more than 20,000 units are made. And next month, management of Lucky is evaluating whether to make 20,000 units(proposal 1) or 25,000 units(proposal 2). Costs and expenditures related to each proposal are shown below. Operating data for the month are summarized as follows; . unit price : $75 . unit variable manufacturing cost : $35 . fixed manufacturing cast : $400,000 . unit variable selling and administrative cost : $5 . fixed selling and administrative cost : $100,000 Instructions) 1. Make Absorption Costing Income Statement for Proposal 1 and Proposal 2 2. Make Variable Costing Income Statement for Proposal 1 and Proposal 2 3. Comment the following sentence "managers could misinterpret increases in income from operations due to changes in efficiencies"based on the answer from question 1 and question 2.

During the first month of operations ended June 30, 2016, Lucky Inc., has no beginning inventory and sales are estimated 20,000 units at $75 per unit. Also, sales can not be changed if more than 20,000 units are made. And next month, management of Lucky is evaluating whether to make 20,000 units(proposal 1) or 25,000 units(proposal 2). Costs and expenditures related to each proposal are shown below. Operating data for the month are summarized as follows; . unit price : $75 . unit variable manufacturing cost : $35 . fixed manufacturing cast : $400,000 . unit variable selling and administrative cost : $5 . fixed selling and administrative cost : $100,000 Instructions) 1. Make Absorption Costing Income Statement for Proposal 1 and Proposal 2 2. Make Variable Costing Income Statement for Proposal 1 and Proposal 2 3. Comment the following sentence "managers could misinterpret increases in income from operations due to changes in efficiencies"based on the answer from question 1 and question 2.

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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