Problem 5-4 (Part Level Submission) Uli Steel produces high-quality worktables.

Question

Problem 5-4 (Part Level Submission) Uli Steel produces high-quality worktables. The company has been in operation for 3 years, and sales have declined each year due to increase competition. The following information is available: 2017 2018 2019 Total 10,000 9,0007,900 26,900 Units sold Units produced Fixed production costs Variable production costs per unit 10,000 10,000 6,900 26,900 310,000 $310,000 $310,000 $112 $112 $112 $343 $343 $343 Fixed selling and administrative expense $304,300 $304,300 $304,300 Selling price per unit

Explanation / Answer

1.net profit for 2017

sales-variable cost=contribution

profit=contribution-fixed cost

so ,sales = 10000 x $343 =$3430000

variable cost= 10000 x $112 =$1120000

contribution= $3430000-$1120000=$2310000

net profit (2017)= $2310000-$304300-$310000=$1695700

ending inventory= 0

2.net profit for 2018

sales-variable cost=contribution

profit=contribution-fixed cost

so ,sales = 9000 x $343 =$3087000

variable cost= 9000 x $112 =$1008000

contribution= $3087000-$1008000=$2079000

net profit (2017)= $2079000-$304300-$310000=$1464700

ending inventory= 1000 units

3. net profit for 2019

sales-variable cost=contribution

profit=contribution-fixed cost

so ,sales = 7900 x $343 =$2709700

variable cost= (6900+1000) x $112 =$884800

contribution= $2709700-$884800=$1824900

net profit (2017)= $1824900-$304300-$310000=$1210600

ending inventory= 0units

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