13)

Current Attempt in Progress The Colin Division of Oriole Company sells its product for $35 per unit. Variable costs per unit include: manufacturing, $14; and selling and administrative, $2. Fixed costs are: $320000 manufacturing overhead, and $50000 selling and administrative. There was no beginning inventory. Expected sales for next year are 40000 units. William Brown, the manager of the Colin Division, is under pressure to improve the performance of the Division. As part of the planning process, he has to decide whether to produce 40000 units or 50000 units next year.

What would the net income be under absorption costing for each alternative?

40000 units 50000 units

$454000 $390000

$390000 $464000

$390000 $390000

$390000 $580000