Financial and Managerial Accounting: P6-8A Dilithium Batteries is a division of Enterprise

Financial and Managerial Accounting 
P6-8A Absorption and Variable Costing Income Statements when Sales Level and Production Level Change 
Dilithium Batteries is a division of Enterprise Corporation. The division manufactures and sells a long-life battery used in a wide variety of applications. During the coming year, it expects to sell 60,000 units for $30 per unit. Nyota Uthura is the division manager. She is considering producing either 60,000 or 90,000 units during the period. Other information is presented in the schedule. 
Division Information for 2014 
Beginning inventory - 
Expected sales in units 60,000 
Selling price per unit 30.00 
Variable manufacturing costs per unit 12.00 
Fixed manufacturing overhead costs (total) 540,000 
Fixed manufacturing overhead costs per unit: 
    Based on 60,000 units 9.00 per unit ($540,000/60,000)
    Based on 90,000 units 6.00 per unit ($540,000/90,000)
Manufacturing cost per unit: 
    Based on 60,000 units 21.00 per unit ($12 variable + $9 fixed)
    Based on 90,000 units 18.00 per unit ($12 variable + $6 fixed)
Variable selling and administrative expenses 2.00 
Fixed selling and administrative expenses (total) 50,000 

Instructions 
(a)  Prepare an absorption costing income statement, with one column showing the results if 60,000 units are produced and one column showing the results if 90,000 units are produced. 
(b)  Prepare a variable costing income statement, with one column showing the results if 60,000 units are produced and one column showing the results if 90,000 units are produced. 
(c)   Reconcile the difference in net incomes under the two approaches and explain what accounts for this difference. 
(d)  Discuss the relative usefulness of the variable costing income statements versus the absorption costing income statements for decision making and for evaluating the manager’s performance.
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