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The Colin Division of Mochrie Company sells its product for $30 per unit. Variable costs per unit are: manufacturing, $15; and selling and administrative, $2. Fixed costs are: $240000 manufacturing overhead, and $50000 selling and administrative. There was no beginning inventory. Expected sales for next year are 40000 units. Ryan Stiles, the manager of the Colin Division, is under pressure to improve the performance of the Division. As he plans for next year, he has to decide whether to produce 40000 units or 50000 units.
Question 1: What would the net income be under variable costing for each alternative?
40000 units 50000 units
$230000 $230000
$230000 $278000
$230000 $288000
$278000 $230000
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