Question - Management of The Rarebit expects to sell 14,000 units for $12 each in the upcoming year and is deciding between producing 14,000 or 16,000 units. The company will incur variable costs of $4 per unit and total fixed costs of $21,000. The company also incurs fixed selling costs of $12,000 annually and incurs variable selling costs of $2 per unit. Prepare absorption costing income statements for the two options to determine how many units the company should produce to generate the highest income from operations. Round fixed manufacturing costs per unit to two decimal places.
Use the information to determine how many units the company should produce to generate the highest income from operations using variable costing income statements.