Answer:
11,000
Explanation:
150,000/12,500=12
38,000-20,000=18,000
18,000/12=1,500
12,500-1,500=11,000
The units sold during the first year of operations are 11,000 units.
Data and Calculations:
Variable manufacturing costs per unit = $20
Total fixed manufacturing overhead for the period = $150,000
Production units in the first year of operations = 12,500
Absorption costing's net operating income = $38,000
Variable costing's net operating income = $20,000
Fixed manufacturing overhead per unit = $12 ($150,000/12,500)
The difference between Absorption costing net operating profit and variable costing net operating income = $18,000 ($38,000 -$20,000)
The units for ending inventory = Difference in profits divided by fixed cost per unit
= 1,500 ($18,000/$12) units
Units sold = Total production units for the year - Ending Inventory
= 11,000 (12,500 -1,500) units
Under Variable Costing, Sales Revenue is determined as follows:
Contribution = $170,000 ($150,000 + $20,000)
Sales Revenue = Variable costs + Fixed Costs
= $390,000 ($170,000 + $220,000)
Variable Costing Income Statement:
Sales revenue as above = $390,000
Cost of goods sold 220,000 ($20 x 11,000)
Contribution $170,000
Fixed costs 150,000
Net operating income = $20,000
Absorption Costing Income Statement:
Sales revenue as above = $390,000
Cost of goods sold 352,000 ($32 x 11,000)
Net operating income = $38,000
Thus, the units that the company sold in the first year of its operations are 11,000 units.
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