Milden Company manufactures and sells a single product. A partially completed sc
ID: 2342199 • Letter: M
Question
Milden Company manufactures and sells a single product. A partially completed schedule of the
company’s total and per unit costs over a relevant range of 60,000 to 100,000 units produced and
sold each year is given in the Problem 3 sheet of the Lab Template.
Use the template provided on the Problem 3 sheet of the Lab Template.
1. Complete the schedule of the company’s total and unit costs.
2. Assume that the company produces and sells 90,000 units during the year at the selling price
of $ 9.50 per unit. Prepare a contribution format income statement for the year.
Units Produced and Sold 80,000 60,000 100,000 TOTAL COSTS: Variable Costs$ Fixed Costs $158,000.00 $210,666.67 $ 263,333.33 $370,000.00 $520,000.00 Total Costs COST PER UNIT Variable Cost Fixed Cost Total Cost Per Unit Income Statement In Contribution Format Sales Variable Expenses Contribution Margin Fixed Expenses NetOeing Income What effect does an increase in the number of units manufactured have on: a. Unit fixed costs? Explain why b. Unit variables costs?Explain why. c. Total fixed costs? Explain why d. Total variable costs? Explain why.Explanation / Answer
1.
2.
3.
a. Increase in number of units mfg will result in decrease of unit fixed costs, due to absorption of same cost by larger number of units.
b. Increase in number of units mfg will not result in any change in unit variable costs, because these change in line with quantum of operations/production.
c. Increase in number of units mfg will not result in any change in total fixed costs, because these don't change upto a level / quantum of operations/production.
d. Increase in number of units mfg will result in increase of total variable costs, , because these change in line with quantum of operations/production.
Units produced and sold 60,000 80,000 100,000 Total costs: Variable costs $ 158,000 $ 210,667 $ 263,333 Fixed costs $ 370,000 $ 370,000 $ 370,000 Total costs $ 528,000 $ 580,667 $ 633,333 Cost per unit Variable costs $ 2.63 $ 2.63 $ 2.63 Fixed costs $ 6.17 $ 4.63 $ 3.70 Total costs per unit $ 8.80 $ 7.26 $ 6.33