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:
|Cost of production||600,000||550,000|
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.
Explain the profit differences. How would variable costing income statements help the manager understand the division's operating income?
Please show calculations!
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