P19-7C Electricswitch is a division of Cunningham Products Corporation. The division manufactures and sells an atomic switch used in a wide variety of applications. During the coming year it expects to sell 200,000 units for $8 per unit. Mel Torme is the division manager. He is considering producing either 200,000 or 250,000 units during the period. Other information is presented in the schedule.

Division Information for 2012

Beginning inventory 0

Expected sales in units 200,000

Selling price per unit $8

Variable manufacturing cost per unit $3

Fixed manufacturing overhead cost (total) $500,000

Fixed manufacturing overhead costs per unit:

Based on 200,000 units $2.50 per unit ($500,000 200,000)

Based on 250,000 units $2.00 per unit ($500,000 250,000)

Manufacturing cost per unit:

Based on 200,000 units $5.50 per unit ($3 variable $2.50 fixed)

Based on 250,000 units $5.00 per unit ($3 variable $2.00 fixed)

Variable selling and administrative expense $0.50

Fixed selling and administrative expense (total) $12,000 In

(a) Prepare an absorption costing income statement, with one column showing the results if 200,000 units are produced and one column showing the results if 250,000 units are produced.

(b) Prepare a variable costing income statement, with one column showing the results if 200,000 units are produced and one column showing the results if 250,000 units are produced.