Use the Following Information for Items
the Colin Division $\quad$

question 47

Short Answer

Use the following information for items
The Colin Division of Mochrie Company sells its product for $30 per unit.Variable costs per unit are: manufacturing, $12; and selling and administrative, $2.Fixed costs are: $200,000 manufacturing overhead, and $50,000 selling and administrative.There was no beginning inventory.Expected sales for next year are 40,000 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 40,000 units or 50,000 units.
-What would the net income be under variable costing for each alternative? $\quad$$\quad$$\quad$$\underline{40,000 \text { units }} \quad \underline{50,000 \text { units }}$
a) $\quad$$\quad$$\quad$$\quad$ $390.00 $\quad$$\quad$$\quad$ $390.00
b) $\quad$$\quad$$\quad$$\quad$ $390.00 $\quad$$\quad$$\quad$ $430.00
c) $\quad$$\quad$$\quad$$\quad$ $390.00 $\quad$$\quad$$\quad$ $440.00
d) $\quad$$\quad$$\quad$$\quad$ $430.00 $\quad$$\quad$$\quad$ $390.00

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Definitions:

Total Surplus

The total net gains for society represented by the combined amount of consumer surplus and producer surplus in a market.

Producer Surplus

This is an economic measure of the difference between the amount producers are willing to supply a good for and the amount they actually receive.

Consumer Surplus

The difference between the maximum price consumers are willing to pay for a product and the actual market price they pay.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service and the actual amount they receive due to market price.