Swola Company reports the following annual cost data for its single product.Normal production level 75,000unitsDirect materials$1.25per unitDirect labor$2.50per unitVariable overhead$3.75per unitFixed overhead$300,000in 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 absorption costing?
A. There will be no change in income.
B. $187,500 increase.
C. $187,500 decrease.
D. $112,500 decrease.
E. $112,500 increase.
Answer: B
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