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Office2U sells a wide variety of office equipment and furniture. The company recently launched its new ergonomic office chair, Comfy. Ergonomic chairs are designed with
Office2U sells a wide variety of office equipment and furniture. The company recently launched its new ergonomic office chair, Comfy. Ergonomic chairs are designed with adjustable features that enhance sitting comfort, improve sitting posture and prevent from neck or backache. As for the year 2022, the management expects to sell 10,000 units of Comfy for RM750 per unit. Mr. Sim, the production manager, is considering producing either 10,000 or 16,000 units for the year. The company provides the following information: Required (a) Calculate manufacturing cost per unit (i) based on 10,000 units and (ii) based on 16,000 units, assuming that the company is using absorption costing. (b) Prepare an absorption costing Statement of Profit or Loss, by showing two columns: (i) 10,000 units produced and (ii) 16,000 units produced. (c) Briefly explain why is the net income different for the two production levels, even though the units sold remain the same at 10,000 units
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