Homework Answers
Solution a:
Fixed manufacturing cost per unit at production level of 4300 units = $58,500/ 4300 = $13.60465 per unit
Fixed manufacturing cost per unit at production level of 6500 units = $58,500/ 6500 = $9 per unit
In case company produces 6500 units then fixed manufacturing overhead deferred in ending inventory = 2200*$9 = $19,800
Therefore Absorption costing income will differ by $19,800 from a plan to produce 4300 units and a plan to produce 6500 units.
Solution b:
As fixed manufacturing overhead is considered as a period expense, therefore variable costing income will not differ between two production plan.
Hence difference in variable costing income under two production plan = $0.
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