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:

Gross Profit

Gross profit is the difference between sales revenue and the cost of goods sold, indicating how efficiently a company is producing or sourcing its products.

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, showing revenue, expenses, and net income.

Perpetual Inventory System

A procedural method in inventory accounting that directly records every inventory sale or purchase with the aid of computerized point-of-sale systems and enterprise asset management software.

Sales Tax

A tax on sales or on the receipts from sales.