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 $8 per unit. Ester Madden is the division manager. She is considering producing either 200,000 or 250,000 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		$8
Variable manufacturing cost per unit		$2.00
Fixed manufacturing cost (total)		$500,000
Fixed manufacturing overhead costs per unit
Based on 200,000 units		$2.50	per unit ($500,000 200,000)
Based on 250,000 units		$2.00	per unit ($500,000 250,000)
Manufacturing cost per unit
Based on 200,000 units		$4.50	per unit ($2.00 variable + $2.50 fixed)
Based on 250,000 units		$4.00	per unit ($2.00 variable + $2.00 fixed)
Variable selling and administrative expenses		$0.35	per unit
Fixed selling and administrative expenses (total)		$11,700

(a)

Partially correct answer icon

Your answer is partially correct.

Prepare an absorption-costing income statement, with one column showing the results if 200,000 units are produced and one column showing the results if 250,000 units are produced.

BASIC ELECTRIC MOTORS DIVISION Income Statement For the Year Ended 2020 Absorption Costing
Units produced		250,000		200,000
Units sold
Net incomeVariable costsCost of goods soldSalesFixed costsGross profitContribution margin		$		$
AddLess: Net incomeContribution marginSalesGross profitCost of goods soldVariable costsFixed costs
Cost of goods soldContribution marginNet incomeSalesGross profitFixed costsVariable costs
AddLess: Volume varianceSelling and administrative expensesCost of goods soldCosts of goods manufacturedGoods available for saleBeginning inventoryEnding inventory
SalesFixed costsNet incomeContribution marginVariable costsCost of goods soldGross profit		$		$

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