Homework

Funny Pumps is a division of BC Controls Corporation. The division manufactures and sells the pumps that are used in a wide variety of applications. During the coming year it expects to sell 25,000 units for $17 per unit. John Thistle manages the division. He considers producing either 25,000 or 35,000 units during the period. Other important information is presented in the schedule:

Division information – 2015:

Beginning inventory 0

Expected sales in units 25,000

Selling price per unit $17.00

Variable manufacturing cost per unit $6.00

Fixed manufacturing overhead cost (total) $140,000

Fixed manufacturing overhead costs per unit:

based on 25,000units $5,60 per unit ($140,000/25,000)

based on 35,000 units $4.00 per unit ($140,000/35,000)

Manufacturing cost per unit:

based on  25,000units $ 11.60 per unit ($6.00 variable + $5.60 fixed)

Based on 35,000 units  $ 10.00 per unit ($6.00 variable + $4.00 fixed)

Selling and administrative expense (all fixed) $37,000

Required: Prepare a variable costing income statement with two columns – one should show the results if 25,000 units are produced, and the second column should show the results if 35,000 units are produced.