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Management Accounting

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QUESTION 5 A Limited with financial year of Dec 31, has two divisions, namely division B and division C. Division B manufactures and sells electronic equipment that is used in a wide variety of applications. Division C manufactures and sells stationery. Division B expects to sell 30,000 units for $25 per unit for the coming year of 2022. Raymond Wong, manager of division B, is considering producing either 30,000 or 35,000 units during the period. Other information is presented in the schedule below: $25 Division B Information - 2022 Beginning inventory 0 Expected sales in units 30.000 Selling price per unit Variable manufacturing cost per unit $7 Fixed manufacturing overhead costs (total) $420,000 Fixed manufacturing overhead costs per unit Based on 30,000 units ($420,000 + 30,000) $14 Based on 35,000 units ($420,000 + 35,000) $12 Manufacturing cost per unit Based on 30,000 units (57 variable + $14 fixed) $21 Based on 35,000 units (57 variable + $12 fixed) $19 Selling and administrative expenses (all fixed) $25,000 Recently Division Copened a new product line to manufacture a new product, namely, Product Y. Cost and sales data for the first month of operations, November 2021, of the new product line are shown below: Manufacturing Costs Fixed Overhead $140,000 Variable overhead $3 per unit Direct labor $12 per unit Direct material $30 per unit Beginning inventory O units Units produced 10,000 Units sold Selling and Administrative Costs Fixed $200,000 Variable 54 per unit sold Product Y sells for $110. Management is interested in the opening month's results and has asked for an income statement. Assume Company A adopts absorption costing for both divisions B and C. 9,000 c. Required: a. Prepare an absorption costing income statement for Division B with one column showing the results if 30,000 units are produced and one column showing the results if 35,000 units are produced for the coming year of 2022. (6 marks) b. Briefly explain the difference of income for the two production levels in Division B. Limit your response to 30 words. (2 marks) Determine the production cost per unit for Product Y. (2 marks) Prepare an income statement for the new product line of Division for the first month of its operation. (4 marks) From a decision-making perspective, discuss the benefits of using variable costing to managers. Limit your response to 30 words. (3 marks) 1. Variable costing ignores the increasing importance of fixed costs in manufacturing companies. Do you agree? Explain. Limit your response to 50 words. (3 marks) d. e

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