Change all of the numbers in the data area of your worksheet so that it looks like this:

Applying Excel

Data

Selling price per unit $$340$

Manufacturing costs:

Variable per unit produced:

Direct materials $$159$

Direct labor $$74$

Variable manufacturing overhead $$24$

Fixed manufacturing overhead per year $$106,400$

Selling and administrative expenses:

Variable per unit sold $$6$

Fixed per year $$42,000$

Year $1$ Year $2$

Units in beginning inventory $0$

Units produced during the year $2,8001,900$

Units sold during the year $2,3002,300$

Make a note of the absorption costing net operating income $($loss$)$ in Year $2.$

At the end of Year $1,$ the companys board of directors set a target for Year $2$ net operating income of $$70,000$ under absorption costing. If this target is met, a large bonus would be paid to the CEO of the company. Keeping everything else the same from part $(2)$ above, change the units produced in Year $2$ to $3,800$ units.

$($b$)$ What is the net operating income $($loss$)$ in Year $2$ under absorption costing?