40,000 Units to Be Manufactured Number of units/unit cost/total cost Manufacturing cost:

Variable 40,000 / $45 / 1,800.000

Fixed. 40,000 / $10 / 400.000

Total. /$55 / 2,200.000

Selling and administrative expenses:

Variable. 960,000

Fixed 320,000

Total 1,280,000

50,000 Units to Be Manufactured Number of units /unit cost/ total cost

Manufacturing cost:

Variable 50,000 / $45 / 2,250.000

Fixed. 50,000 /$8. / 400.000

Total. / $53. / 2,650.000

Selling and administrative expenses:

Variable 960,000

Fixed 320,000

Total 1,280,000

1-In one group, prepare an absorption costing income statement for the year ending December 31,2012, based on sales of 40,000 units and the manufacture of 40,000 units. In the other group, conduct the same analysis, assuming production of 50,000 units.

2-explain the defense in the income from operation reported in (1).

3-compute Mosss total salary for the year 2012, based on sales of 40,000 units and the manufacture of 40,000 units (group 1) and 50,000 units (group2). Compare your answers.

4 in addition to maximizing the use of Patel companys productive capacity, why might Moss wish to manufacture 50,000 units rather than 40,000 units?

5 Can you suggest and alternative way in which Mosss salary determinate, using a base salary of $128,000 and 10% of income from operation in excess of $340,000, so that salary could not be increased by simply manufacturing more units?