Question
Your Company manufactures and sells one product. The selling price per unit is $80 per unit. The following pertains to the company's first year of
Your Company manufactures and sells one product. The selling price per unit is $80 per unit. The following pertains to the company's first year of operations in which it produced 40,000 and sold 35,000 units.
Variable costs: | |
Manufacturing: | |
Direct materials | 960,000 |
Direct labor | 560,000 |
Variable manufacturing overhead | 80,000 |
Variable selling | 140,000 |
Fixed Costs per year: | |
Fixed manufacturing | 840,000 |
Fixed selling and administrative | 490,000 |
Instructions: | |
1.Using the above information prepare | |
an income statement in the traditional | |
format. | |
2. Prepare an income statement in the | |
contribution format. | |
3. Compute the unit cost under absorption costing. | |
4. Compute the unit cost under variable costing. | |
5. Compute the contribution margin per unit. | |
6. Compute the contribution margin ratio | |
7. There is a difference in the net income using one | |
statement versus the other; explain the | |
cause of the difference? | |
8. Compute the breakeven sales in units 9. Compute the breakeven sales dollars. |
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