Utensils N More Manufactures a Special Ladle That Sits Upright

Utensils N More manufactures a special ladle that sits upright or can be attached to any pot. The accounting manager, Candace, presents three different income statements to the board of directors at year-end. The board understands absorption costing, as they evaluate the gross margin and gross margin rate on a regular basis. However, it's Candace's job to help them understand how fixed-MOH affects the product cost under absorption costing. Information for three possible capacity levels is shown below. Candace also notes there are no price or efficiency variances this period. Therefore, any fixed-MOH volume variance is written off to COGS. Instructions
a. Calculate the cost per unit that would be capitalized under each possible denominator level. Break out the variable and fixed components and list the total cost per unit.
b.Calculate the fixed-MOH volume variance for each denominator level, identifying amount and sign, for (1) 2025 and (2) 2026.
c. Prepare income statements for 2025 for each denominator level.
d.Prepare income statements for 2026 for each denominator level.
e.Why is income the same or different under each denominator level?
f.What gross margin percentage is earned under each capacity level for (1) 2025 and (2) 2026?
g.If the budgeted sales volume for 2025 was 19,000 units, prepare an income statement for 2025 if Candace used the budgeted sales as its denominator. (Round the fixed-MOH cost per unit to the nearest two cents.)

h. Candace is worried that the demand will decrease in 2027. If the budgeted demand does decrease, how will that affect the fixed-MOH rate? The gross margin and operating income? Should Candace increase the selling price on the ladles? Explain your answer.