Chapter 5-3

Haas Company manufactures and sells one product. The following information pertains to each of the companys first three years of operations:

Variable costs per unit:
Manufacturing:
Direct materials	$	27
Direct labor	$	19
Variable manufacturing overhead	$	3
Variable selling and administrative	$	2
Fixed costs per year:
Fixed manufacturing overhead	$	460,000
Fixed selling and administrative expenses	$	240,000

During its first year of operations, Haas produced 100,000 units and sold 100,000 units. During its second year of operations, it produced 115,000 units and sold 90,000 units. In its third year, Haas produced 80,000 units and sold 105,000 units. The selling price of the companys product is $58 per unit.

Required:

1. Compute the companys break-even point in units sold.

Break-even unit sales

units

2. Assume the company uses variable costing:

a.Compute the unit product cost for year 1, year 2, and year 3.

	Year 1	Year 2	Year 3
Unit product cost

b. Prepare an income statement for year 1, year 2, and year 3.

Haas CompanyVariable Costing Income StatementYear 1Year 2Year 3Variable expenses:Total variable expensesFixed expenses:Total fixed expenses:Net operating income (loss)

3. Assume the company uses absorption costing:

a. Compute the unit product cost for year 1, year 2, and year 3. (Round your intermediate and final answers to 2 decimal places.)

	Year 1	Year 2	Year 3
Unit product cost

b. Prepare an income statement for year 1, year 2, and year 3. (Round your intermediate calculations to 2 decimal places.)

Haas CompanyAbsorption Costing Income StatementYear 1Year 2Year 3Net operating income (loss)