MANAGERIAL ACCOUNTING QUESTION

Hekate Products produces widgets in its factory. It began the year with zero inventory. Price and cost data are shown below. Hekate uses full absorption costing as mandated by Generally Accepted Accounting Principles.

Sales price per unit = $50

Direct material cost per unit = $12

Direct labor cost per unit = $8

Manufacturing overhead, all fixed = $5 million

Selling and administrative costs, all fixed = $4 million

Of the manufacturing overhead, $3 million was depreciation and $2 million was a cash expenditure. Of the selling and administrative costs, $1 million was depreciation and $3 million was a cash expenditure. All direct material and direct labor costs were cash expenditures and represent variable costs. All sales were in cash.

1. What is Hekate's break-even quantity in a year in which quantity manufactured and quantity sold are the same?

During the year, Hekate produced 500,000 units and sold 400,000 units.

2. What is the book value of each of the 100,000 units in inventory at the end of the year?

3. What is Hekate's accounting income for the year?

4. What is Hekate's cash flow from operations for the year?