1. Because of soft demand for the Brazilian Division’s product, the inven-
tory should be drawn down to the minimum level of 50 units. Drawing
inventory down to the minimum level would require production as fol-
lows during the last quarter:
Desired inventory, December 31 ... 50 units
Expected sales, last quarter ... 600 units
Total needs... 650 units
Less inventory, September 30... 400 units
Required production ... 250 units
Drawing inventory down to the minimum level would save inventory car-
rying costs such as storage (rent, insurance), interest, and obsoles-
cence.
The number of units scheduled for production will not affect the re-
ported net operating income or loss for the year if variable costing is in
use. All fixed manufacturing overhead cost will be treated as an expense
of the period regardless of the number of units produced. Thus, no fixed
manufacturing overhead cost will be shifted between periods through
the inventory account and income will be a function of the number of
units sold, rather than a function of the number of units produced.
Bạn đang xem 1. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH07 VARIBLE COSSTING TOOL FOR MANAGEMENT