Please Answer All Questions Problem 6-18 Variable and Absorption Costing Unit Pr
ID: 2535484 • Letter: P
Question
Please Answer All Questions
Problem 6-18 Variable and Absorption Costing Unit Product Costs and Income Statements [LO6-1, LO6- 2] 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 Direct materials Direct labor Variable manufacturing overhead 21 13 Variable selling and administrative Fixed costs per year: $ 330,000 Fixed manufacturing overhead Fixed selling and administrative expenses 150,000 During its first year of operations, Haas produced 40,000 units and sold 40,000 units. During its second year of operations, it produced 55,000 units and sold 30,000 units. In its third year, Haas produced 20,000 units and sold 45,000 units. The selling price of the company's product is $52 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.Explanation / Answer
1) Break even unit sales = total fixed cost/contribution margin total fixed cost fixed manufacturing overhead 330,000 fixed selling & administrative 150,000 total fixed cost 480,000 contribution margin per unit Selling price per unit 52 less variable cost Direct mterials 21 direct labor 13 VMOH 4 Variable selling & adm expense 2 40 contribution margin per unit 12 Break even unit sales = 480,000/12 40000 units answer 2a) unit product cost under variable costing Direct mterials 21 direct labor 13 VMOH 4 total unit product cost 38 year 1 year 2 year 3 unit product cost 38 38 38 b) Variable costing income statement units sold 40,000 30,000 45,000 year 1 year 2 year 3 sales 2080000 1560000 2340000 variable expenses variable cost of goods sold 1520000 1140000 1710000 variable selling & adm expense 80000 60000 90000 total variable expense 1600000 1200000 1800000 contribution margin 480000 360000 540000 fixed xpenses: fixed manufacturing overhead 330,000 330,000 330,000 fixed selling & adm expnes 150,000 150,000 150,000 total fixed expense 480,000 480,000 480,000 net income /loss 0 -120,000 60,000 3a) Absorptiong costing year 1 year 2 year 3 Direct mterials 21 21 21 direct labor 13 13 13 VMOH 4 4 4 FMOH (330000/units prod) 8.25 6 16.5 total unit product cost 46.25 44 54.5 year 1 year 2 year 3 unit product cost 46.25 44 54.5 3b) income statement year 1 year 2 year 3 sales 2080000 1560000 2340000 cost of goods sold 1850000 1320000 2190000 gross margin 230000 240000 150000 Selling and adm exp 230,000 210,000 240,000 net income/loss 0 30,000 -90,000 cost of goods sold for year 3 = 20000*54.5+ 25000*44 year 2 = 30000*44 year 1 = 40000*46.5