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Question 36

Basic Electric Motors is a division of Basic Electric Products Corporation. The division manufactures and sells an electric switch used in a wide variety of applications. During the coming year, it expects to sell 200,000 units for $7 per unit. Ester Madden is the division manager. She is considering producing either 200,000 or 280,000 units during the period. Other information is as follows:

Division Information for 2020
Beginning inventory		0
Expected sales in units		200,000
Selling price per unit		$7
Variable manufacturing cost per unit		$2.60
Fixed manufacturing cost (total)		$560,000
Fixed manufacturing overhead costs per unit
Based on 200,000 units		$2.80	per unit ($560,000 200,000)
Based on 280,000 units		$2.00	per unit ($560,000 280,000)
Manufacturing cost per unit
Based on 200,000 units		$5.40	per unit ($2.60 variable + $2.80 fixed)
Based on 280,000 units		$4.60	per unit ($2.60 variable + $2.00 fixed)
Variable selling and administrative expenses		$0.30	per unit
Fixed selling and administrative expenses (total)		$11,900

(a) Your answer is partially correct. Try again. Prepare an absorption- costing income statement, with one column showing the results if 200,000 units are produced and one column showing the results if 280,000 units are produced. BASIC ELECTRIC MOTORS DIVISION Income Statement For the Year Ended 2020 Absorption Costing Units produced 280,000 200,000 1960000 Units sold 1400000 1960000 1400000 Sales Cost of goods sold Less 1288000 1080000 Gross profit 672000 320000 Less Selling and administrative expenses 95900 71900 576100 248100 Net income

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