Selected account balances for the year ended December 31 are provided below for BFun Company: Sales revenue Selling and administrative salaries Purchases of raw materials Direct labor. Advertising expense Manufacturing overhead. Sales Commissions..... $1,000,000 $110,000 $290,000 ? $80,000 $270,000 $50,000 Inventory balances at the beginning and end of the year were as follows: Raw materials Work in process Finished goods Beginning of the Year $40,000 ? $50,000 End of the Year $10,000 $35,000 ? The total manufacturing costs for the year were $683,000; the goods available for sale totaled $740,000; and the cost of goods sold totaled $660,000. a. Required: 1. Calculate the following: Direct material used in production b. Direct labor added to production c. Ending finished goods inventory d. Cost of goods manufactured e. Beginning work in process inventory 2. Use the information above to complete a traditional income statement. Show gross margin/profit and net operating income. The company would like to use the financial and management information above to forecast revenues and expenses for different levels of sales volume. In order to perform the analysis below, assume that the number of units sold is equal to the number of units produced. In other words, there are no units in process or finished goods inventory. 3. a. Assume that the dollar amounts given above are for the equivalent of 40,000 units produced and sold during the year. Calculate the following: Average material cost per unit b. Average labor cost per unit C. Average manufacturing overhead per unit d. Average total cost per unit 4. Assume that in the following year the company expects to produce and sell 50,000 units and manufacturing overhead is fixed. Remember, direct materials and direct labor are variable costs. Calculate the following: a. Average material cost per unit and total material cost b. Average labor cost per unit and total labor cost Average manufacturing overhead per unit and total manufacturing overhead cost d. Average total cost per unit c. 5. As the manager in charge of production costs, explain to the president of the company the reason for any difference in average total cost per unit between (3d) and (4d) above. 6. Prepare a traditional income statement AND a contribution margin income statement assuming 50,000 units are produced and sold. You will be using the information from your answers to #3 and #4 above, as well as some of the original information. 7. How many units must the company sell to break even? 8. How many units must the company sell to earn an operating income of $300,000? 9. BONUS: The company wants to earn an operating income of $300,000 at their current sales level of 40,000 units. If all variable costs per unit and total fixed costs remain the same, what selling price would the company need to charge
