Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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Carlos Cavalas, the manager of Echo Products’ Brazilian Division, is trying to set the production
| Units | |
|---|---|
| Inventory, January 1 | 0 |
| Production | 71,100 |
| Sales | 63,700 |
| Inventory, September 30 | 7,400 |
The division can rent warehouse space to store up to 30,500 units. The minimum inventory level that the division should carry is 2,800 units. Mr. Cavalas is aware that production must be at least 4,440 units per quarter in order to retain a nucleus of key employees. Maximum production capacity is 44,200 units per quarter.
Demand has been soft, and the sales
Required:
1a. Assume that the division is using variable costing. How many units should be scheduled for production during the last quarter of the year?
1b. Assume that the division is using variable costing. Will the number of units scheduled for production affect the division’s reported income or loss for the year?
2. Assume that the division is using absorption costing and that the divisional manager is given an annual bonus based on divisional operating income. If Mr. Cavalas wants to maximize his division’s operating income for the year, how many units should be scheduled for production during the last quarter?
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