Question

Variable manufacturing costs are $126 per unit, and fixed manufacturing costs are $157,500. Sales are estimated to be 10,000 units. If an amount is zero, enter "0". a. How much would absorption costing income from operations differ between a plan to produce 10,000 units and a plan to produce 15,000 units

Answer 1

$52,500

Step-by-step explanation:

Plan - 1 Plan - 2

Units produced 10,000 15,000

Variable Manufacturing cost $126 $126

Fixed manufacturing cost $15.75 $10.50

($157,500 ÷ Units produced)

Unit cost $141.75 $136.50

Working note

Fixed manufacturing cost for Plan A = $157,500 ÷ 10,000

= $15,75

Fixed manufacturing cost for Plan B = $157,500 ÷ 15,000

= $10.50

Unit cost for Plan A = $126 + $15.75

= $141.75

Unit cost for Plan B = $126 + $10.50

= $136.50

Income under two plans different for the amount as below Number of units in ending inventory in Plan -2 = 5,000 units

(i.e. 15000 units produced - 10,000 units sold)

Fixed manufacturing of per unit = $10.5

Difference in Income in two plans under Absorption costing = 10,000 × $10.5

= $52,500

Variable costing

Therefore, there will be no difference in income of Two plans under Variable costing.