Question
Sutcliffe Hardware Assume that you are part of the accounting team for Sutcliffe Hardware. The company has only one product that sells for $80 per
Sutcliffe Hardware
Assume that you are part of the accounting team for Sutcliffe Hardware. The company has only one product that sells for $80 per unit. Sutcliffe estimates total fixed costs to be $3,800. Sutcliffe estimates direct materials cost of $24.00 per unit, direct labor costs of $30.00 per unit, and variable overhead costs of $6.00 per unit. The CEO would like to see what the gross margin and operating income will be if 300 units are sold in the next period. Prepare a contribution margin income statement.
Contribution margin income statement
Sales $ 24,000
Less: Variable costs -18,000
Contribution margin $ 6,000
Less: Fixed costs -$3,800
Operating income $2,200
Further analysis of Sutcliffe Hardware's fixed costs revealed that the company actually faces annual fixed overhead costs of $4,200 and annual fixed selling and administrative costs of $1,800. Variable cost estimates are correct: direct materials cost, $24.00 per unit; direct labor costs, $30.00 per unit; and variable overhead costs, $6.00 per unit. At this time, the selling price of $80 will not change. What are the Units Sold at Break Even??
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