Electricoil is a division of Meier Products Corporation. The division manufactures and sells an electric coil used in a wide variety of applications. During the coming year, it expects to sell 200,000 units for $9 per unit. Mark Barnes is the division manager. He is considering producing either 200,000 or 250,000 units during the period. Other information is presented in the schedule.

Instructions
(a) 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 250,000 units are produced.
(b) Prepare a variable costing income statement, with one column showing the results if 200,000 units are produced and one column showing the results if 250,000 units are produced.
(c) Reconcile the difference in net incomes under the two approaches and explain what accounts for this difference.
(d) Discuss the relative usefulness of the variable costing income statements versus the absorption costing income statements for decision making and for evaluating the manager€™sperformance.

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Division Information for 2014 Beginning inventory Expected sales in units Selling price per unit Variable manufacturing costs per unit Fixed manufacturing overhead costs (total) 0 200,000 59 $3 $500,000 Fixed manufacturing overhead costs per unit: Based on 200,000 units Based on 250,000 units Manufacturing costs per unit: Based on 200,000 units Based on 250,000 units $2.50 per unit ($50,000 200,000) $2.00 per unit ($500,000250,000) $5.50 per unit ($3 variable $2.50 fixed) $5.00 per unit ($3 variable $2.00 fixed) 0.40 $15,000 Variable selling and administrative expense Fixed selling and administrative expense (total)