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 2020 Beginning inventory 0 Expected sales in units 200,000 Selling price per unit $7 Variable manufacturing cost per unit $2.60 Fixed manufacturing cost (total) $560,000 Fixed manufacturing overhead costs per unit $2.80 per unit ($560,000+ 200,000) Based on 200,000 units Based on 280,000 units $2.00 per 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 $0.30 per unit Fixed selling and administrative expenses (total) $11,900 BASIC ELECTRIC MOTORS DIVISION Income Statement For the Year Ended 2020 Absorption Costing Units produced 200,000 280,000 200000 200000 Units sold 1400000 1400000 Sales Cost of goods sold 1080000 920000 Less 480000 320000 Gross profit Selling and administrative expenses Less 71900 71900 408100 248100 Net income BASIC ELECTRIC MOTORS DIVISION Income Statement For the Year Ended 2020 Variable Costing Units produced 280,000 200,000 200000 200000 Units sold 1400000 1400000 Sales Less Variable costs 486000 486000 Variable cost of goods sold 60000 60000 Variable selling and administrative expenses Contribution margin 854000 854000 Fixed costs Less 560000 560000 Fixed manufacturing overhead 11900 11900 Fixed selling and administrative expenses 282100 282100 Net income