[The following information applies to the questions displayed below Diego Compan
ID: 2404644 • Letter: #
Question
[The following information applies to the questions displayed below Diego Company manufactures one product that is sold for $76 per unit in two geographic regions-the East and West regions. The following information pertains to the company's first year of operations in which it produced 58,000 units and sold 54,000 units Variable costs per unit Manufacturing Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative 23 15 3 3 Fixed costs per year Fixed manufacturing overhead Fixed selling and administrative expenses $ 1160,000 $ 640.000 The company sold 40.000 units in the East region and 14.000 units in the West region. It determined that $320,000 of its fixed selling and administrative expenses is traceable to the West region, $270,000 is traceable to the East region, and the remaining $50,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only productExplanation / Answer
Solution 7:
Amount of difference between variable costing and absorption costing net operating income (losses) = Income under variable costing - Income under absorption costing
= -$72,000 - $8,000 = $80,000
Solution 8.1:
Company's breakeven point in unit sales = Fixed cost / contribution margin per unit
Contribution margin per unit = $32 per unit
Fixed cost = 1,800,000
Breakeven point in unit sales = $1,800,000 / $32 = 56250 units
Solution 8.2:
Breakeven sales volume = 56250 units
Existing sales volume = 54000 units
Therefore breakeven sales volume is above from existing sales volume.
Solution 9:
If sales volume in the east region and west region had been reversed, company overall breakeven point in unit sales will remain the same as same contribution margin offered by both regions, therefore weighted average contribution margin per unit will remain the same.
Company's overall breakeven point in unit sales = 56250 units
Solution 10:
If company produced and sold 54000 units, then income under variable costing will remain the same as there is no change in sales volume. Therefore net operating income under variable costing = -$72,000
Note: I have answered first 4 parts of the question as per chegg policy, kindly post separate question for answer of remaining parts.
Computation of net operating income - Variable costing Particulars Amount Sales (54000 * $76) $4,104,000.00 Variable cost: Direct material (54000 * $23) $1,242,000.00 Direct labor (54000*$15) $810,000.00 Variable manufacturing overhead (54000*$3) $162,000.00 Variable selling and administrative expenses (54000*$3) $162,000.00 Total variable cost $2,376,000.00 Contribution margin $1,728,000.00 Fixed Expenses: Fixed manufacturing overhead $1,160,000.00 Fixed selling and administrative expenses $640,000.00 Total fixed expenses $1,800,000.00 Net operating income (Loss) -$72,000.00Related Questions
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