Earth's Best Light (EBL), a producer of energy-efficient light bulbs, expects that demand will increase markedly over the next decade Due to the high fixed costs involved in the business, EBL has decided to evaluate its financial performance using absorption costing income. The production-volume variance is written off to cost of goods sold. The variable cost of production is $2.40 per bulb. Fixed manufacturing costs are $1,125,000 per year Variable and fixed selling and administrative expenses are $0 20 per bulb sold and $200,000, respectively. Because its light bulbs are currently popular with environmentally conscious customers, EBL can sell the bulbs for $9 20 each EBL is deciding among various concepts of capacity for calculating the cost of each unit produced Its choices are as follows (Click the icon to view the capacity information) Read the requirements Requirement 1. Calculate the inventoriable cost per unit using each level of capacity to compute fixed manufacturing cost per unit Begin by determining the formula to calculate the inventoriable cost per unit (Abbreviations used: mfg = manufacturing, admin=administration) = Inventoriable cost per unit
Earth's Best Light (EBL), a producer of energy-efficient light bulbs, expects that demand will increase markedly over the next decade Due to the high fixed costs involved in the business, EBL has decided to evaluate its financial performance using absorption costing income. The production-volume variance is written off to cost of goods sold. The variable cost of production is $2.40 per bulb. Fixed manufacturing costs are $1,125,000 per year Variable and fixed selling and administrative expenses are $0 20 per bulb sold and $200,000, respectively. Because its light bulbs are currently popular with environmentally conscious customers, EBL can sell the bulbs for $9 20 each EBL is deciding among various concepts of capacity for calculating the cost of each unit produced Its choices are as follows (Click the icon to view the capacity information) Read the requirements Requirement 1. Calculate the inventoriable cost per unit using each level of capacity to compute fixed manufacturing cost per unit Begin by determining the formula to calculate the inventoriable cost per unit (Abbreviations used: mfg = manufacturing, admin=administration) = Inventoriable cost per unit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Requirements 1. Calculate the inventoriable cost per unit using each level of capacity to compute fixed
2. Suppose EBL actually produces 250,000 bulbs. Calculate the production-volume variance using each level of capacity to compute the fixed manufacturing
3. Assume EBL has no beginning inventory If this year's actual sales are 187,500 bulbs, calculate operating income for EBL using each type of capacity to compute fixed manufacturing cost per unit
please complete requirment part 1,2,3
Transcribed Image Text:Earth's Best Light (EBL), a producer of energy-efficient light bulbs, expects that demand will increase markedly over the next decade Due to the high
fixed costs involved in the business, EBL has decided to evaluate its financial performance using absorption costing income. The production-volume
variance is written off to cost of goods sold. The variable cost of production is $2.40 per bulb. Fixed manufacturing costs are $1,125,000 per year
Variable and fixed selling and administrative expenses are $0.20 per bulb sold and $200,000, respectively. Because its light bulbs are currently
popular with environmentally conscious customers, EBL can sell the bulbs for $9 20 each EBL is deciding among various concepts of capacity for
calculating the cost of each unit produced Its choices are as follows
4
(Click the icon to view the capacity information)
Read the requirements
Requirement 1. Calculate the inventoriable cost per unit using each level of capacity to compute fixed manufacturing cost per unit
Begin by determining the formula to calculate the inventoriable cost per unit. (Abbreviations used: mfg manufacturing admin administration)
Inventoriable cost per unit
Transcribed Image Text:Data table
Theoretical capacity
Practical capacity
Normal capacity
Master-budget capacity
750,000 bulbs
375,000 bulbs
225,000 bulbs (average expected output for the next three years)
187,500 bulbs expected production this year
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