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Carlos Cavalas, the manager of Echo Products' Brazilian Division, is trying to set the production schedule for the last quarter of the year. The Brazilian Division had planned to sell 69,190 units during the year, but by September 30 only the following activity had been reported:
Units
Inventory, January 1 0
Production 72,200
Sales 62,900
Inventory, September 30 9,300
Required:
Problem 1a. Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year?
Problem 1b. Will the number of units scheduled for production affect the division's reported income or loss for the year?
Problem 2. Assume that the division is using absorption costing and that the divisional manager is given an annual bonus based on divisional operating income. If Mr. Cavalas wants to maximize his division's operating income for the year, how many units should be scheduled for production during the last quarter?
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