Ravenclaw Relics manufactures and sells a single product. The following costs were incurred during the companys first year of operations:

Variable costs per unit:
Manufacturing:
Direct materials	$	27
Direct labour		7
Variable manufacturing overhead		4
Variable selling and administrative		9
Fixed costs per year:
Fixed manufacturing overhead		370,800
Fixed selling and administrative expense		183,200

During the year, the company produced 30,900 units and sold 22,900 units. The selling price of the companys product is $73 per unit.

Required:

1. Assume that the company uses absorption costing.

a. Compute the unit product cost.

b. Prepare an income statement for the year. (Do not leave any empty spaces; input a 0 wherever it is required.)

c. If 2,000 more units were produced during the year, the operating income would:

multiple choice 1

• Increase

• Remain the same

• Decrease

2. Assume that the company uses variable costing.

a. Compute the unit product cost.

b. Prepare an income statement for the year. (Do not leave any empty spaces; input a 0 wherever it is required.)

c. If 2,000 more units were produced during the year, the operating income would:

multiple choice 2

• Increase

• Remain the same

• Decrease

3. Compute the Break-Even point for the company in units to be sold and sales in dollars.