Eganville Company Has Per-Unit Fixed and Variable Manufacturing Costs of $40

question 96

Essay

Eganville Company has per-unit fixed and variable manufacturing costs of $40 and $15, respectively. Variable selling and administrative costs are $9 per unit. Consider the two independent cases that follow for the firm.
Case A: Variable-costing net income, $110,000; sales, 6,000 units; production, 6,000 units
Case B: Variable-costing net income, $178,000; sales, 7,500 units; production, 7,100 units
Required:
A. From a product-costing perspective, what is the basic difference between absorption costing and variable costing?
B. Compute Eganville's absorption-costing net income in Case A.
C. Compute Eganville's absorption-costing net income in Case B.

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Definitions:

Ego Strength

Refers to the ability of the ego to effectively deal with the demands of reality, control impulses, and handle stress.

Fundamental Attribution Error

The tendency for observers to overemphasize personality traits and underestimate situational factors when explaining others' behaviors.

Situational Attributional Tendency

The tendency to attribute an individual's behavior to situational factors rather than to internal personality traits.

Internal Characteristics

The traits, attributes, or features that originate within an individual's psychological or biological makeup.