Question

please help answer part c as well it is very important.

P20-8B Electricoil is a division of Meier Products Corporation. The division manufactures and sells an electric coil used in a wide variety of applications. During the coming year, it expects to sell 200,000 units for $9 per unit. Mark Barnes is the division manager. He is considering producing either 200,000 or 250,000 units during the period. Other information is presented in the schedule. Division Information for 2017 Beginning inventory Expected sales in units Selling price per unit Variable manufacturing costs per unit Fixed manufacturing overhead costs (total) Fixed manufacturing overhead costs per unit Based on 200, units Based on 250, units Manufacturing costs per unit Based on 200, units Based on 250, units Variable selling and administrative expense Fixed selling and administrative expense (total) 0 200,000 $9 $3 S500,000 $2.50 per unit ($50,000 200,000) $2.00 per unit ($500,000+250,000) S5.50 per unit ($3 variable S2.50 fixed) $5.00 per unit ($3 variable +$2.00 fixed) $0.40 $15,000 Instructions absorption costing income statement, with one column showing the results if 200 units are (a) Prepare an produced and one column showing the results if 250.000 units are produced. (b) Prepare a variable costing income statement, with one column showing the results if 200,000 units are produced and one column showing the results if 250,000 units produced (c) Reconcile the differences in net incomes under the two approaches and explain what accounts for this difference. d) Discuss the relative uselulness of the variable costing income statements versus the absorption costing income statements for decision making and for evaluating the managereperformaRce- BELOW ELECTRICOIL DIVI3ION Income Statement For the Year Ended December 31, 2017 Absorption Costing (a) 200,000 Produced 250,000 Produced Note that "SALES remain the same Sales (# unifs x $9) 1,800,000 1,800,000 Cost of goods sold in BOTH columns Gross profit Var selling & Admin The problem is trying to show the difference "Ending expenses Exd selling & Admin expenses Net Income Inventory" makes between costing methods ELECTRICOIL DIVISION Income Statement For the Year Ended December 31, 2017 Variable Costing (b) 200,000 Produced 250,000 Produced Sales (N unifs x $9) 1,800,000 1,800,000 Contribution margin Net Income Don't forget this:see answers below for help) (c)

Answer 1

ans 1
Absorption costing
For the month ended Dec 31
Produced P		180000	180000
Sales (P*9)		1620000	1620000
Less: Cost of good sold		$990,000	$900,000
		(180000*5.5)	(180000*5)
Gross profit		$630,000	$720,000
Variable Selling & adm expenses (.4*P)		72000	72000
Fixed Selling & adm expenses		15000	15000
Net operating income		$543,000	$633,000
ans 2
Variable Costing
For the month ended Dec 31
Produced P		180000	180000
Sales (P*9)		1620000	1620000
Less: Variable Cost of good sold (P*3)		$540,000	$540,000
Variable Selling & adm expenses (.4*P)		72000	72000
Contribution margin		$1,008,000	$1,008,000
Fixed manufacturing ovrhead		500000	500000
Fixed Selling & adm expenses		15000	15000
Net operating income		$493,000	$493,000
ans c Reconcile
Income under Variable costing		$493,000	$493,000
Add: Fixed manufacturing overhead deferred in ending inventory		50000	140000
		(20000*2.5)	(70000*2)
Income under absorption costing		$543,000	$633,000
If any doubt please comment. If satisfied rate