Exercise 3.13: Comparing net incomes under absorption costing Profit at multiple activity levels Homework - Unanswered A manufacturing company incurs the following costs during the month of August related to production: Direct material $8/unit Direct labour $6/ unit Variable manufacturing overhead $2/ unit Fixed manufacturing overhead $18,000 total The company expects to sell 10,000 units at a price of $30/ unit. If variable selling and administrative expenses are $0.50/unit and total fixed selling and administrative expenses are $8,000, what is net income at production levels of 10,000 units and 12,000 units. If management compensation was tied to net income, which production level would the manager choose to operate at? Is this good for the company? Assume they follow absorption costing. (Hint: best to prepare a gross profit income statement at each production level)