Exercise 6-14 Variable Costing Unit Product Cost and Income Statement; Break-Eve
ID: 2596641 • Letter: E
Question
Exercise 6-14 Variable Costing Unit Product Cost and Income Statement; Break-Even Analysis [LO6-1, 06-2 Chuck Wagon Grills, Inc., makes a single product-a handmade specialty barbecue grill that it sells for $210. Data for last year's operations follow Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: 28,800 19,800 1,000 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Total variable cost per unit 50 80 20 10 160 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative Total fixed costs s 700,000 285,000 5 985,000 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
Solution 1:
Solution 2:
Solution 3:
Contribution per unit = 950000/19000 = $50 per unit
For breakeven point, company has to earn contribution of $985,000.
Therefore, unit to be sold to acheive breakeven point = 985000/50 = 19700 units
Product Cost - Variable Costing Particulars Amount Direct Material $50 Direct Labor $80 Variable manufacturing overhead $20 Unit Product Cost $150