Ask Question
11 May, 11:49

Swisher, Incorporated reports the following annual cost data for its single product: Normal production level 30,000 units Direct materials $ 6.40 per unit Direct labor $ 3.93 per unit Variable overhead $ 5.80 per unit Fixed overhead $ 150,000 in total This product is normally sold for $48 per unit. If Swisher increases its production to 50,000 units, while sales remain at the current 30,000 unit level, by how much would the company's income increase or decrease under absorption costing?

+3
Answers (1)
  1. 11 May, 14:17
    0
    Profit decreases by $322,600

    Explanation:

    Normal production level = 30,000 units

    Cost of direct material per unit = $6.40, total cost = $6.40*30,000=$192,000

    Cost of direct labor per unit = $3.93, total cost = $3.93*30,000=$117,900

    Variable over head cost per unit=$5.80, total cost = $5.80*30,000=$174000

    Fixed overhead total cost = $150,000

    Production cost with 30,000 units will be;

    $192,000 + $117,900 + $174000 + $150,000 = $633900

    Normal selling price of product per unit = $48

    Revenue after normal sell of 30,000 units $48 = 30,000*48=$1440000

    Profit obtained : $806,100

    Increasing the production to 50,000 units you can calculate the projected cost of production

    New production level = 50,000 units

    Cost of direct material per unit = $6.40, total cost = $6.40*50,000=$320,000

    Cost of direct labor per unit = $3.93, total cost = $3.93*50,000=$196,500

    Variable over head cost per unit=$5.80, total cost = $5.80*50,000=$290,000

    Fixed overhead total cost = $150,000

    Production cost with 30,000 units will be;

    $320,000 + $196,500 + $290,000 + $150,000 = $956,500

    Normal selling price of product per unit = $48

    Revenue after normal sell of 30,000 units $48 = 30,000*48=$1440000

    Profit obtained = $483,500

    Decreased in profit = $806100-$483500 = $322,600
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Swisher, Incorporated reports the following annual cost data for its single product: Normal production level 30,000 units Direct materials ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers