Chuck Wagon Grills, Inc., makes a single product-a handmade specialty barbecue g

Question

Chuck Wagon Grills, Inc., makes a single product-a handmade specialty barbecue grill that it sells for $300. Data for last year's operations follow: Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: 10,500 8,200 2,300 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Total variable cost per unit 60 40 10 30 140 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative Total fixed costs $ 160,000 800,000 $960,000 Required: 1. Assume that the company uses variable costing. Compute the unit product cost for one barbecue grill 2. Assume that the company uses variable costing. Prepare a contribution format income statement for last year 3. What is the company's break-even point in terms of the number of barbecue grills sold?

Explanation / Answer

1) Unit product cost :

2) Contribution format income statement :

3) Break even point = 960000/(300-140) = 6000 Units

Direct material 60 Direct labour 40 Variable manufacturing overhead 10 Unit product cost 110

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