Contribution Income Statement and Cost-Volume-Profit Graph (LO2, 3)

Alberta Company produces a product that is sold for $40 per unit. The company produced and sold 6,000 units during May 2012. There were no beginning or ending inventories. Variable and fixed costs follow.

Variable Costs per Unit Fixed Costs per Month |

Manufacturing: Manufacturing overhead .... $40,000 Direct materials........... $10 Selling and administrative ... 20,000 Direct labor..........-.-: 2 Total: canoeee eene eee $60,000 Manufacturing overhead... . eS) $17 Selling and administrative .... 5 So tallRee eyes. ccs chats secant $22 Required

a. Prepare a contribution income statement for May.

b. Prepare a cost-volume-profit graph. Label the horizontal axis in units with a maximum value of 10,000. Label the vertical axis in dollars with a maximum value of $400,000. Draw a vertical line on the graph for the current (6,000) unit sales level, and label total variable costs, total fixed costs, and total profits at 6,000 units. (p. 83)