Problem 6-18 Variable and Absorption Costing Unit Product Costs and Income State
ID: 2524414 • Letter: P
Question
Problem 6-18 Variable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6- 2) 10 points Haas Company manufactures and sells one product. The following information pertains to each of the company's first three years of operations Variable costs per unit: Manufacturing: 27 19 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: $460,000 Fixed manufacturing overhead Fixed selling and administrative expenses 240,000 During its first year of operations, Haas produced 100,000 units and sold 100,000 units. During its second year of operations, it produced 115,000 units and sold 90,000 units. In its third year, Haas produced 80,000 units and sold 105,000 units. The selling price of the company's product is $58 per unit. Required 1. Compute the company's break-even point in unit sales. 2. Assume the company uses variable costing a. Compute the unit product cost for Year 1, Year 2, and Year 3 b. Prepare an income statement for Year 1, Year 2, and Year 3 3. Assume the company uses absorption costing a. Compute the unit product cost for Year 1, Year 2, and Year 3 b. Prepare an income statement for Year 1, Year 2, and Year 3 Answer is not complete. Complete this question by entering your answers in the tabs below. Req Req 2A Req 2B Req 3A Req 3B Prepare an income statement for Year 1, Year 2, and Year 3. Assume the company uses absorption costingExplanation / Answer
1) Break even unit sales = total fixed cost/contribution margin total fixed cost fixed manufacturing overhead 460,000 fixed selling & administrative 240,000 total fixed cost 700,000 contribution margin per unit Selling price per unit 58 less variable cost Direct mterials 27 direct labor 19 VMOH 3 Variable selling & adm expense 2 51 contribution margin per unit 7 Break even unit sales = 700,000/7 100000 units answer 2a) unit product cost under variable costing Direct mterials 27 direct labor 19 VMOH 3 total unit product cost 49 year 1 year 2 year 3 unit product cost 49 49 49 b) Variable costing income statement units sold 100,000 90,000 105,000 year 1 year 2 year 3 sales 5800000 5220000 6090000 variable expenses variable cost of goods sold 4900000 4410000 5145000 variable selling & adm expense 200000 180000 210000 total variable expense 5100000 4590000 5355000 contribution margin 700000 630000 735000 fixed xpenses: fixed manufacturing overhead 460,000 460,000 460,000 fixed selling & adm expnes 240,000 240,000 240,000 total fixed expense 700,000 700,000 700,000 net income /loss 0 -70,000 35,000 3a) Absorptiong costing year 1 year 2 year 3 Direct mterials 27 27 27 direct labor 19 19 19 VMOH 3 3 3 FMOH (460000/units prod) 4.6 4 5.75 total unit product cost 53.6 53 54.75 year 1 year 2 year 3 unit product cost 53.6 53 54.75 3b) income statement year 1 year 2 year 3 sales 5800000 5220000 6090000 cost of goods sold 5360000 4770000 5705000 gross margin 440000 450000 385000 Selling and adm exp 440,000 420,000 450,000 net income/loss 0 30,000 -65,000 cost of goods sold for year 3 = 25000*53 + 80000*54.75 year 2 = 90000*53 year 1 = 60000*60.5