Number of goggles produced 245,000 Number of goggles sold 230,000 28 Sales price per unit Variable manufacturing cost per unit Sales commission cost per unit 10 1,960,000 Fixed manufacturing overhead Fixed selling and administrative costs 260,000
Number of goggles produced 245,000 Number of goggles sold 230,000 28 Sales price per unit Variable manufacturing cost per unit Sales commission cost per unit 10 1,960,000 Fixed manufacturing overhead Fixed selling and administrative costs 260,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Using variable and absorption costing, making decisions
The 2018 data that follow pertain to Mike’s Magnificent Eyewear, a manufacturer of swimming goggles. (Mike’s Magnificent Eyewear had no beginning Finished Goods Inventory in January 2018.)
Requirements
- Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for Mike’s Magnificent Eyewear for the year ended December 31, 2018.
- Which statement shows the higher operating income? Why?
- Mike’s Magnificent Eyewear’s marketing vice president believes a new sales promotion that costs $40,000 would increase sales to 235,000 goggles. Should the company go ahead with the promotion? Give your reasoning.
![Number of goggles produced
245,000
Number of goggles sold
230,000
28
Sales price per unit
Variable manufacturing cost per unit
Sales commission cost per unit
10
1,960,000
Fixed manufacturing overhead
Fixed selling and administrative costs
260,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9567ec34-af14-4f0f-984c-4c33168565db%2F34c76952-8430-4e48-8f5b-af9d09b4ff9d%2Fxlfujxo.png&w=3840&q=75)
Transcribed Image Text:Number of goggles produced
245,000
Number of goggles sold
230,000
28
Sales price per unit
Variable manufacturing cost per unit
Sales commission cost per unit
10
1,960,000
Fixed manufacturing overhead
Fixed selling and administrative costs
260,000
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