The Wittred Division of Victoria Sports Company manufactures boomerangs, which are sold to wholesalers and retailers.

The division manager has set a target of 250,000 boomerangs for next month’s production and sales. However, the manager has prepared an analysis of the effects on operating income of deviations from the target:

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Volume in units Sales @$3.00 200,000 250,000 300,000 $600,000 $750,000 $900,000 Full costs @ $2.50 Operating income 500,000 $100,000 625,000 750,000 $125,000 $150,000 The costs have the following characteristics. Variable manufacturing costs are $1 per boomerang; variable selling costs are $0.20 per boomerang. Fixed manufacturing costs per month are $300,000; fixed selling and administrative costs, $50,000. 1. Prepare a correct analysis of the changes in volume on operating income. Prepare a tabulated set of income statements at levels of 200,000, 250,000, and 300,000 boomerangs. Also show percentages of operating income in relation to sales. 2. Compare your tabulation with the manager's tabulation. Why is the manager's tabulation incorrect?