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Business, 05.05.2020 23:46 mads3499

GoWay manufacturers and sells a portable battery-powered transportation device that can be stored in a backpack. The device usually sells for $5,000 per unit. The company normally sells units as quickly as manufactured and does not maintain a finished goods inventory. However, during the most recent year, the company produced 10,000 units, but only sold 9,000. A military customer has requested to buy the other 1,000 units for delivery on December 31 of the current year. The offered price is $4,000 per unit for all 1,000 units. Below are absorption-costing based calculations of ending inventory and net income, on the 9,000 units already sold. Variable manufacturing costs ($3,000 X 10,000) $30,000,000 Fixed manufacturing costs 12,000,000 Cost of goods manufactured $42,000,000 Cost of goods sold ($42,000,000 X (9,000/10,000)) 37,800,000 Ending inventory ($42,000,000 X (1,000/10,000)) $4,200,000 Sales (9,000 X $5,000) $45,000,000 Cost of goods sold 37,800,000 Gross profit $7,200,000 Selling, general, & administrative costs Variable (9,000 X $100) $900,000 Fixed 5,800,000 6,700,000 Net income $500,000 Prepare a revised absorption-costing based income statement, assuming acceptance of the 1,000 unit order. Also prepare variable-costing income statements (with and without the order). Compare the results and evaluate whether the order should be accepted.

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