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28 Sep 2019
The manager of the manufacturing division of Iowa Windows doesnot understand why income went down when sales went up. Some of theinformation he has selected for evaluation include:
January February Units produced 40,000 30,000 Units sold 30,000 40,000 Sales $600,000 $800,000 Beginning inventory 0 150,000 Cost of production 600,000 550,000 Ending inventory 150,000 0 Operating income 70,000 35,000
The division operated at normal capacity during January.Variable manufacturing cost per unit was $5, and the fixed costswere $400,000. Selling and administrative expenses were allfixed.
Required:
Explain the profit differences. How would variable costingincome statements help the manager understand the division'soperating income?
Please show calculations!
thank you,
The manager of the manufacturing division of Iowa Windows doesnot understand why income went down when sales went up. Some of theinformation he has selected for evaluation include:
January | February | |
Units produced | 40,000 | 30,000 |
Units sold | 30,000 | 40,000 |
Sales | $600,000 | $800,000 |
Beginning inventory | 0 | 150,000 |
Cost of production | 600,000 | 550,000 |
Ending inventory | 150,000 | 0 |
Operating income | 70,000 | 35,000 |
The division operated at normal capacity during January.Variable manufacturing cost per unit was $5, and the fixed costswere $400,000. Selling and administrative expenses were allfixed.
Required:
Explain the profit differences. How would variable costingincome statements help the manager understand the division'soperating income?
Please show calculations!
thank you,
Elin HesselLv2
28 Sep 2019