Using variable and absorption costing, making decisionsThe 2018 data that follow pertain to Eli’s Electric Eyewear, a manufacturer of swimming goggles. (Eli’s Electric Eyewear had no beginning Finished Goods Inventory in January 2018.)RequirementsPrepare both conventional (absorption costing) and contribution margin (variable costing) income statements for Eli’s Electric Eyewear for the year ended December 31, 2018.Which statement shows the higher operating income? Why?Eli’s Electric Eyewear’s marketing vice president believes a new sales promotion that cost? $60,000 would increase sales to 220,000) goggles Should the company go ahead with the promotion? Give your reasoning Number of goggles producedNumber of goggles sold245,000215,000Sales price per unit22Variable manufacturing cost per unitSales commission cost per unitFixed manufacturing overhead1,470,000Fixed selling and administrative costs250,000

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Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 14EB: Crafts 4 All has these costs associated with production of 12,000 units of accessory products:...

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Using variable and absorption costing, making decisions

The 2018 data that follow pertain to Eli’s Electric Eyewear, a manufacturer of swimming goggles. (Eli’s Electric Eyewear had no beginning Finished Goods Inventory in January 2018.)

Requirements

Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for Eli’s Electric Eyewear for the year ended December 31, 2018.
Which statement shows the higher operating income? Why?
Eli’s Electric Eyewear’s marketing vice president believes a new sales promotion that cost? $60,000 would increase sales to 220,000) goggles Should the company go ahead with the promotion? Give your reasoning

Number of goggles produced
Number of goggles sold
245,000
215,000
Sales price per unit
22
Variable manufacturing cost per unit
Sales commission cost per unit
Fixed manufacturing overhead
1,470,000
Fixed selling and administrative costs
250,000

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