Xx) P9-42 (similar to) Question Help Global Energy Saver (GES), a producer of energy-efficient light bulbs, expects that demand will increase markedly over the next decade. Due to the high fixed costs involved in the business, GES has decided to evaluate its financial performance using absorption costing income. The production-volume variance is written off to cost of goods sold. The variable cost of production is $2.90 per bulb. Fixed manufacturing costs are $1,170,000 per year. Variable and fixed selling and administrative expenses are $0.25 per bulb sold and $240,000, respectively. Because its light bulbs are currently popular with environmentally conscious customers, GES can sell the bulbs for $9.90 each. GES is deciding among various concepts of capacity for calculating the cost of each unit produced. Its choices are as follows: (Click the icon to view the capacity information.) Read the requirements. Requirement 1. Calculate the inventoriable cost per unit using each level of capacity to compute fixed manufacturing cost per unit. Begin by determining the formula to calculate the inventoriable cost per unit. (Abbreviations used: mfg = manufacturing, admin. = administration.) Variable production cost + Fixed mfg overhead rate Inventoriable cost per unit Now calculate the inventoriable cost per unit at each level of capacity. Inventoriable Capacity type cost per unit Theoretical Practical Normal Master Budget Theoretical capacity 900,000 bulbs Practical capacity 520,000 bulbs Normal capacity 260,000 bulbs (average expected output for the next three years) Master-budget capacity 225,000 bulbs expected production this year 1. Calculate the inventoriable cost per unit using each level of capacity to compute fixed manufacturing cost per unit. 2. Suppose GES actually produces 300,000 bulbs. Calculate the production-volume variance using each level of capacity to compute the fixed manufacturing overhead allocation rate. 3. Assume GES has no beginning inventory. If this year's actual sales are 225,000 bulbs, calculate operating income for GES using each type of capacity to compute fixed manufacturing cost per unit