Question
near the very end of the fiscal year, the production manager noted that if Net Income increases by $200 they will get a big bonus.
near the very end of the fiscal year, the production manager noted that if Net Income increases by $200 they will get a big bonus. How can the production manager increase Net income using Absorption costing even though no additional units will be produced?'
| Prior Year (Budget and Actual) | Current Year (Budget and Actual) |
Beginning Inventory (Units) | 0 | ? |
Sales (Units) | 600,000 | 575,000 |
Manufactured (Units) | 600,000 | 640,000 |
Selling Price ($/unit) | 9.90 | 10.00 |
Variable Manufacturing Cost ($/unit) | 4.80 | 5.00 |
Total Fixed Manufacturing Costs ($) | 1,560,000 | 1,600,000 |
Variable Selling Cost ($/unit) | 1.00 | 1.00 |
Total Fixed SG&A Costs ($) | 351,000 | 358,000 |
Other information:
- The manufacturer uses FIFO.
- All Variable costs are direct costs
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