New Amsterdam Company was just awarded a patent on a highly-specialized device. The engineer has set a strict production guideline. After making a mid-range plan for the company, the company expects the following for the next 2 years.

Selling price per unit............................................$120

Variable cost per unit:

Direct materials.................................................$10

Direct Labor......................................................$30

Variable overhead...............................................$6

Fixed factory overhead cost per unit.....................................................$68,400

Selling and administrative expense per year(all fixed).............................$14,600

Year ......................................1......................2

Production (unit).................. 1,900................ 2,000

Sales (unit) .........................1,100................ 2,800

What is the expected income under absorption costing in year 2 ?

A) $ 60,800

B) $ 100,400

C) $ 101,800

D) $ 95,400

E) None of the above

What is the expected income under Variable costing in year 2 ?

A) $ 130,600

B) $ 60,800

C) $ 124,200

D) $ 129,200

E) None of the above

Answer rating: 100% (QA)

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