CUipaily produced 20,000 units and expects to sell 19,800 of them. If a new cust

Question

CUipaily produced 20,000 units and expects to sell 19,800 of them. If a new customer unexpectedly emerges and expresses interest in buying the 200 extra units that have been produced by the company and that would otherwise remain unsold, what incremen- tal selling and administrative cost per unit is incurred to sell these units to the customer? Harris Company manufactures and sells a single product. A partially completed schedule of the company's total costs and costs per unit over the relevant range of 30,000 to 50,000 units is given below: Units Produced and Sold 30,000 40,000 50,000 Total costs: Variable cost.. Fixed cost. $180,000 ? 300,000 ? 480,000 Total cost Costs per unit Variable cost Total cost per unit . I. Complete the above schedule of the company's total costs and costs per unit. 2. Assume that the company produces and sells 45,000 units during the year at a selling price of S16 per unit. Prepare a contribution format income statement for the year

Explanation / Answer

1 Variable cost remaines same per unit, while fixed cost remains same in total. Units produced and sold Total Costs            30,000            40,000            50,000 Variable Cost          180,000         240,000          300,000 (40,000*6) (50,000*6) Fixed Cost          300,000         300,000          300,000 Total Cost          480,000         540,000          600,000 Costs per unit Variable Cost 6 6 6 (180000/30000) Fixed Cost 10 7.5 6 (300,000 /30,000) (300,000 /40,000) (300,000 /50,000) Total cost per unit 16 13.5 12 2 Sales (45000*$16)          720,000 Variable Cost (45000*$6)          270,000 Contribution          450,000 Fixed Cost          300,000 Net Income          150,000

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