ACCT 2025 Carlos Cavalas, the manager of Echo Products’ Brazilian Division
Carlos Cavalas, the manager of Echo Products’ Brazilian Division, is trying to set the production schedule for the last quarter of the year. The Brazilian Division had planned to sell 3,600 units during the year, but by September 30 only the following activity had been reported: |
| Units | |
| Inventory, January 1 | 0 |
| Production | 2,400 |
| Sales | 2,000 |
| Inventory, September 30 | 400 |
The division can rent warehouse space to store up to 1,000 units. The minimum inventory level that the division should carry is 50 units. Mr. Cavalas is aware that production must be at least 200 units per quarter in order to retain a nucleus of key employees. Maximum production capacity is 1,500 units per quarter. |
| Demand has been soft, and the sales forecast for the last quarter is only 600 units. Due to the nature of the division’s operations, fixed manufacturing overhead is a major element of product cost. |
| Required: | |
| 1-a. | Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year? |
Will the number of units scheduled for production affect the division’s reported income or loss for the year?
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Rating:
/5
Solution: ACCT 2025 Carlos Cavalas, the manager of Echo Products’ Brazilian Division