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The manager of the manufacturing division of Iowa Windows does not understand why income went down when sales went up. Some of the information he has selected for evaluation include: January February

The manager of the manufacturing division of Iowa Windows does not understand why income went down when sales went up. Some of the information he has selected for evaluation include:

  January February
Units produced 40,000 30,000
Units sold 30,000 40,000
Sales $600,000 $800,000
Beginning inventory 0 150,000
Cost of production 600,000 550,000
Ending inventory 150,000 0
Operating income 70,000 35,000

The division operated at normal capacity during January. Variable manufacturing cost per unit was $5, and the fixed costs were $400,000. Selling and administrative expenses were all fixed.

Required:

Explain the profit differences. How would variable costing income statements help the manager understand the division's operating income?

Please show calculations!

thank you,

Jul 16 2021 View more View Less

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