Question 36

Basic Electric Motors is a division of Basic Electric Products Corporation. The division manufactures and sells an electric switch used in a wide variety of applications. During the coming year, it expects to sell 200,000 units for $7 per unit. Ester Madden is the division manager. She is considering producing either 200,000 or 280,000 units during the period. Other information is as follows:

Division Information for 2020Beginning inventory0Expected sales in units200,000Selling price per unit$7Variable manufacturing cost per unit$2.60Fixed manufacturing cost (total)

$560,000

Fixed manufacturing overhead costs per unit

Based on 200,000 units

$2.80per unit ($560,000 200,000)Based on 280,000 units

$2.00per unit ($560,000 280,000)

Manufacturing cost per unit

Based on 200,000 units

$5.40

per unit ($2.60 variable + $2.80 fixed)

Based on 280,000 units

$4.60

per unit ($2.60 variable + $2.00 fixed)Variable selling and administrative expenses

$0.30per unit

Fixed selling and administrative expenses (total)

$11,900