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Data for 2015, its first year of operations (No beginning inventory): Annual factory capacity (in units): 300,000 Units manufactured in 2015: 240,000 Sales demand: 180,000
Data for 2015, its first year of operations (No beginning inventory): Annual factory capacity (in units): 300,000 Units manufactured in 2015: 240,000 Sales demand: 180,000 Variable manufacturing cost per unit: $10 Fixed manufacturing overhead costs: $1,917,000 Variable non-manufacturing costs per unit: $2 (this is a sales commission) Fixed non-manufacturing costs: $145,000 Sales price per unit: $25 The sales demand, per-unit sales price, per-unit variable manufacturing cost, per-unit sales commission, and total fixed non-manufacturing costs are all expected to stay the same in 2016 from 2015. Fixed manufacturing overhead costs are expected to increase by 10%. 1. Calculate 2015 income and projected 2016 income under Absorption Costing, under each of the following sets of assumptions: a) The company accounts for inventory using FIFO, allocates fixed manufacturing overhead costs based on units produced, manufactures enough units in 2016 to plan for 90,000 units in ending inventory at the end of the year. b) The company accounts for inventory using FIFO, allocates fixed manufacturing overhead costs based on units produced, manufactures at capacity in 2016
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