CookieClub Co. uses variable costing for managerial purposes and absorption costing for external reporting. These past two months, CCC has had an even number of sales at $100,000, at a price of $10/unit. However, in an effort to reduce the risk of stock-outs, management increased production from the regular 10,000 units to 12,500 units for last month only. CCC has fixed costs of $40,000 per month.
Assuming that sales continue to hold constant and production returns to normal levels, if absorption net income was $30,000 last month, what will it be this month? (Round per-unit costs to the nearest cent.)

Question

CookieClub Co. uses variable costing for managerial purposes and absorption costing for external reporting. These past two months, CCC has had an even number of sales at $100,000, at a price of $10/unit. However, in an effort to reduce the risk of stock-outs, management increased production from the regular 10,000 units to 12,500 units for last month only. CCC has fixed costs of $40,000 per month. 
Assuming that sales continue to hold constant and production returns to normal levels, if absorption net income was $30,000 last month, what will it be this month? (Round per-unit costs to the nearest cent.)

Quizplus · Accepted Answer

The Answer of CookieClub Co. uses variable costing for managerial purposes and absorption costing for external reporting. These past two months, CCC has had an even number of sales at $100,000, at a price of $10/unit. However, in an effort to reduce the risk of stock-outs, management increased production from the regular 10,000 units to 12,500 units for last month only. CCC has fixed costs of $40,000 per month. 
Assuming that sales continue to hold constant and production returns to normal levels, if absorption net income was $30,000 last month, what will it be this month? (Round per-unit costs to the nearest cent.)