Number of goggles produced Number of goggles sold 245,000 215,000 Sales price per unit 22 Variable manufacturing cost per unit Sales commission cost per unit Fixed manufacturing overhead 1,470,000 Fixed selling and administrative costs 250,000

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter6: Activity-based, Variable, And Absorption Costing
Section: Chapter Questions
Problem 14EB: Crafts 4 All has these costs associated with production of 12,000 units of accessory products:...
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Using variable and absorption costing, making decisions

The 2018 data that follow pertain to Eli’s Electric Eyewear, a manufacturer of swimming goggles. (Eli’s Electric Eyewear had no beginning Finished Goods Inventory in January 2018.)

Requirements

  1. Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for Eli’s Electric Eyewear for the year ended December 31, 2018.
  2. Which statement shows the higher operating income? Why?
  3. Eli’s Electric Eyewear’s marketing vice president believes a new sales promotion that cost? $60,000 would increase sales to 220,000) goggles Should the company go ahead with the promotion? Give your reasoning
Number of goggles produced
Number of goggles sold
245,000
215,000
Sales price per unit
22
Variable manufacturing cost per unit
Sales commission cost per unit
Fixed manufacturing overhead
1,470,000
Fixed selling and administrative costs
250,000
Transcribed Image Text:Number of goggles produced Number of goggles sold 245,000 215,000 Sales price per unit 22 Variable manufacturing cost per unit Sales commission cost per unit Fixed manufacturing overhead 1,470,000 Fixed selling and administrative costs 250,000
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