Chapter 21: Q-21-13 (page 1167)
Explain how the sales mix can affect the profitability of a company.
Answer
A sales mix is the combination of all the products sold and services rendered by the company.
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Using variable and absorption costing, making decisions
The 2018 data that follow pertain to Mike’s Magnificent Eyewear, a manufacturer of swimming goggles. (Mike’s Magnificent Eyewear had no beginning Finished Goods Inventory in January 2018.)
Number of goggles produced 245,000
Number of goggles sold 230,000
Sales price per unit \( 28
Variable manufacturing cost per unit 10
Sales commission cost per unit 2
Fixed manufacturing overhead 1,960,000
Fixed selling and administrative costs 260,000
Requirements:
Using absorption and variable costing
Meyer Company reports the following information for March:
Net Sales Revenue $ 45,300
Variable Cost of Goods Sold 12,500
Fixed Cost of Goods Sold 11,800
Variable Selling and Administrative Costs 14,000
Fixed Selling and Administrative Costs 5,400
Requirements:
Comparing variable and absorption costing Refer to Exercises E21-16 and E21-17.
Requirements:
When units produced are less than units sold, how does operating income differ between variable costing and absorption costing? Why
Explain how increasing production can increase gross profit when using absorption costing.
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