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Dayton Lighting Company "PUTUL ONLY"

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Dayton Lighting Company had net income for the first 10 months of the current year of $200,000.;One hundred thousand units were manufactured during this period (the same as the planned production);and 100,000 units were sold. Fixed manufacturing overhead was $2,000,000 over the;10-month period (i.e., $200,000 per month). There are no selling and administrative expenses for;Dayton Lighting Company. Both variable and fixed costs are expected to continue at the same rates;for the balance of the year (i.e., fixed costs at $200,000 per month and variable costs at the same;variable cost per unit). Twenty thousand units are to be produced and 19,000 units are to be sold in;total over the last two months of the c urrent year. Assume the unit variable cost is the same in the;current year as in the previous year. (Hint: You cannot calculate revenue or cost of goods sold, you;must work directly with contribution margin or gross margin.);Required;1. If operations proceed as described, will net income be higher under variable or absorption costing for the current year in total? Why?;2. If operations proceed as described, what will net income for the year in total be under (a) variable costing and (b) absorption costing? (Ignore income taxes.);3. Discuss the advantages and disadvantages of absorption and variable costing.

 

Paper#80760 | Written in 18-Jul-2015

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