Expected sales for next year for the Beresford Company is 150,000 units. Curt Planters, manager of the Beresford Division, is under pressure to improve the performance of the Division. As he plans for next year, he has to decide whether to produce 150,000 units or 170,000 units. The Beresford Company will have higher net income if Curt Planters decides to produce

Question

Business

Beckham Calhoun

18 June, 04:29

Expected sales for next year for the Beresford Company is 150,000 units. Curt Planters, manager of the Beresford Division, is under pressure to improve the performance of the Division. As he plans for next year, he has to decide whether to produce 150,000 units or 170,000 units. The Beresford Company will have higher net income if Curt Planters decides to produce

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Answers (1)

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Tomas Palmer · Answer 1

The correct answer is A.

Explanation:

Giving the following information:

The expected sales for next year for the Beresford Company is 150,000 units. Curt Planters, manager of the Beresford Division, is under pressure to improve the performance of the Division. As he plans for next year, he has to decide whether to produce 150,000 units or 170,000 units.

In order to improve its performance based on more production, the company must use an absorption cost method. Absorption cost includes the fixed manufacture cost in the unit product cost. Therefore, by producing more units, the fixed costs spread on more units, decreasing the cost of units sold and increasing gross profit. The fixed costs of the period remain on inventory.

He should produce 180,000 units under absorption cost method.