Wonton Makers Co., (WMC), uses variable costing for managerial purposes and absorption costing for external reporting. These past two months, WMC has had an even number of sales at $70,000, at a price of $35/unit. However, in an effort to reduce inventory levels, management decreased production from the regular 2,000 units to 1,700 units for last month only. WMC has fixed costs of $15,000 per month.
If absorption net income was $25,000 last month, what will it be this month (assuming that sales continue to hold constant and production returns to normal levels)? (Round per-unit costs to the nearest cent.)

Question

Wonton Makers Co., (WMC), uses variable costing for managerial purposes and absorption costing for external reporting. These past two months, WMC has had an even number of sales at $70,000, at a price of $35/unit. However, in an effort to reduce inventory levels, management decreased production from the regular 2,000 units to 1,700 units for last month only. WMC has fixed costs of $15,000 per month. 
If absorption net income was $25,000 last month, what will it be this month (assuming that sales continue to hold constant and production returns to normal levels)? (Round per-unit costs to the nearest cent.)

Quizplus · Accepted Answer

The Answer of Wonton Makers Co., (WMC), uses variable costing for managerial purposes and absorption costing for external reporting. These past two months, WMC has had an even number of sales at $70,000, at a price of $35/unit. However, in an effort to reduce inventory levels, management decreased production from the regular 2,000 units to 1,700 units for last month only. WMC has fixed costs of $15,000 per month. 
If absorption net income was $25,000 last month, what will it be this month (assuming that sales continue to hold constant and production returns to normal levels)? (Round per-unit costs to the nearest cent.)