Question 36 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 $7 per unit. Ester Madden is the division manager. She is considering producing either 200,000 or 280,000 units during the period. Other information is as follows: Division Information for 2020 0 Beginning inventory Expected sales in units 200,000 Selling price per unit $7 Variable manufacturing cost per unit $2.60 Fixed manufacturing cost (total) $560,000 Fixed manufacturing overhead costs per unit $2.80 per unit ($560,000 + 200,000) Based on 200,000 units Based on 280,000 units $2.00 per unit ($560,000 + 280,000) Manufacturing cost per unit Based on 200,000 units Based on 280,000 units $5.40 per unit ($2.60 variable $2.80 fixed) $4.60 per unit ($2.60 variable + $2.00 fixed) $0.30 per unit Variable selling and administrative expenses Fixed selling and administrative expenses (total) $11,900 BASIC ELECTRIC MOTORS DIVISION Income Statement For the Year Ended 2020 Absorption Costing 280,000 Units produced Units sold Sales Less Cost of goods sold Gross profit Less Selling and administrative expenses Net income 200000 1400000 920000 480000 71900 408100 200,000 200000 1400000 1080000 320000 71900 248100 Units produced Units sold Sales Less BASIC ELECTRIC MOTORS DIVISION Income Statement For the Year Ended 2020 Variable Costing 280,000 Variable costs Variable cost of goods sold Variable selling and administrative expenses Contribution margin Less Fixed costs Fixed manufacturing overhead Fixed selling and administrative expenses Net income 200000 1400000 486000 60000 854000 560000 11900 282100 x 200,000 200000 1400000 486000 60000 854000 560000 11900 282100