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Question
Swola Company reports the following annual cost data for its single product.Normal production level 75,000 units
Direct materials $1.25 per unit
Direct labor $2.50 per unit
Variable overhead $3.75 per unit
Fixed overhead $300,000 in total
This product is normally sold for $25 per unit. If Swola increases its production to 200,000 units, while sales remain at the current 75,000 unit level, by how much would the company's income increase or decrease under variable costing?
A. $187,500 increase.
B. $112,500 increase.
C. There will be no change in gross income.
D. $112,500 decrease.
Answer
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