Musketeer Manufacturing Co. has a maximum productive capacity of 210,000 units per year.
Normal capacity is 180,000 units per year. Standard variable manufacturing costs are $10 per unit. Fixed factory overhead is $360,000 per year. Variable selling expense is $5 per unit, and fixed selling expense is $20.
The operating results for the year are as follows: sales, 150,000 units: production, 160,000 units; beginning inventory, 10,000 units. All variances are written off as additions to (or deductions from) the standard cost of sales.
Required:
1. What is the break-even point expressed in dollar sales?
2. How many units must be sold to earn a net operating income of $100,000 per year?
3. Prepare a format income statement for the year ended December 31, 2013, under the following:
Break-even Point; Absorption and Variable Costing
Alamo Products Inc
Alamo Products Inc. has a maximum productive capacity of 100,000 units per year. Normal capacity is 90,000 units per year. Standard variable manufacturing costs are $20 per unit. Fixed factory overhead is $450,000 per year. Variable selling expense is $10 per unit, and fixed selling expense is $300,000 per year. The unit sales price is $50. The operating results for the year are as follows: sales, 80,000 units; production, 85,000 units; and beginning inventory, 5,000 units. All variances are written off as additions to (or deductions from) the standard cost of goods sold.
Required:
1. What is the break-even point expressed in dollar sales?
2. How many units must be sold to earn a net income of $50,000 per year?
3. Prepare a formal income statement for the year ended December 31, 2013, under the following:
a. Absorption costing.
b. Variable costing.