Carlos Cavalas, the manager of Echo Products' Brazilian Division, is trying to set the production schedule for the last quarter of the year. The Brazilian Division had planned to sell 68,750 units during the year, but by September 30 only the following activity had been reported: Units Inventory, January 1 Production 0 73,100 62,500 10,600 Sales Inventory, September 30 ces The division can rent warehouse space to store up to 29,000 units. The minimum inventory level that the division should carry is 1,400 units. Mr. Cavalas is aware that production must be at least 6,360 units per quarter in order to retain a nucleus of key employees Maximum production capacity is 44,600 units per quarter. Demand has been soft, and the sales forecast for the last quarter is only 20,900 units. Due to the nature of the division's operations fixed manufacturing overhead is a major element of product cost. Required: 1a. Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year? 1b. Will the number of units scheduled for production affect the division's reported income or loss for the year? 2. Assume that the division is using absorption costing and that the divisional manager is given an annual bonus based on divisional operating income. If Mr. Cavalas wants to maximize his division's operating income for the year, how many units should be scheduled for production during the last quarter? Complete this question by entering your answers in the tabs below. Required: 1a. Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year? 1b. Will the number of units scheduled for production affect the division's reported income or loss for the year? 2. Assume that the division is using absorption costing and that the divisional manager is given an annual bonus based on divisional operating income. If Mr. Cavalas wants to maximize his division's operating income for the year, how many units should be scheduled for production during the last quarter? Complete this question by entering your answers in the tabs below. Req 1A Req 18 Req 2 Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year? Required production units Req 1B> Req 1A Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Will the number of units scheduled for production affect the division's reported income or loss for the year? OYes ONo Req 1A Req 2> Complete this question by entering your answers in the tabs below. Req 1A Req 18 Req 2 Assume that the division is using absorption costing and that the divisional manager is given an annual bonus based on divisional operating income. If Mr. Cavalas wants to maximize his division's operating income for the year, how many units should be scheduled for production during the last quarter? units Required production Req 1B Reg 2
