Question

Haas Company manufactures and sells one product. The following information pertains to each of the company's first three years of operations: 64 64 Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses 4 A $ 960,000 $ 240,000 During its first year of operations, Haas produced 60,000 units and sold 60,000 units. During its second year of operations, it produced 75,000 units and sold 50,000 units. In its third year, Haas produced 40,000 units and sold 65,000 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 1

Answer with working is given below

Units $1,200,000 Fixed Cost Contribution per unit $20 60,000 Working note: Selling price Less: Variable cost Direct material Direct labor Variable manufacturing cost Variable selling and administrative cost Contribution per unit Contribution Margin % $20 34.48% 2 a) Unit Product cost - Variable Costing Direct Material Direct Labor Variable manufacturing cost Unit Product cost - Variable Costing closing units Valuation of closing units Year 1 $20.00 $12.00 $4.00 $36.00 Year 2 $20.00 $12.00 $4.00 $36.00 25,000 $900,000 Year 3 $20.00 $12.00 $4.00 $36.00 Haas Company Income Statement- Variable Costing Year 1 Year 2 Opening stock Production Sales Closing stock Selling price per unit Year 3 25,000 40,000 65,000 60,000 60,000 75,000 50,000 25,000 $58 $58 $58 $3,480,000 $2,900,000 $3,770,000 $0) $900,000 $1,440,000 $2,340,000 Sales Less : Variable Cost of Goods Sold Beginning Inventory - Finished Goods Variable Manufacturing Cost - $36 per unit Variable Cost of Goods available for Sale Less: Closing stock Cost of Goods sold Variable Selling expenses Total Variable Expenses Contribution Margin Less: Fixed Cost Manufacturing overhead selling and administrative expenses $0 $2,160,000 $2,160,000 $0 $2,160,000 $120,000 $2,280,000 $1,200,000 $2,700,000 $2,700,000 $900,000 $1,800,000 $100,000 $2,340,000 A $130,000 B $2,470,000 A+B $1,300,000 $1,000,000 $960,000 $240,000 $960,000 $240,000 $960,000 $240,000 Operating Income $0 $200,000 $100,000 3 a) Unit Product Cost-Absorption Costing Year 2 $20.00 $12.00 $4.00 Direct Material Direct Labor Variable manufacturing cost Total Variable manufacturing cost Fixed manufacturing cost Production units Fixed manufacturing cost per unit Total Product Cost closing units Valuation of closing units Year 1 $20.00 $12.00 $4.00 $36.00 $960,000 60,000 $16.00 $52.00 $36.00 $960,000 75,000 $12.80 $48.80 25,000 $1,220,000 Year 3 $20.00 A $12.00 $4.00 $36.00 $960,000 40,000 $24.00 B $60.00 A+B 3 b) Haas Company Income Statement-Absorption Costing Year 1 Year 2 Opening stock Production Sales Closing stock Selling price per unit 60,000 60,000 75,000 50,000 25,000 $58 Year 3 25,000 40,000 65,000 0 $58 $58 $3,480,000 $2,900,000 $3,770,000 $3,120,000 $3,120,000 $1,220,000 $2,400,000 $3,620,000 Sales Less: Cost of Goods Sold Beginning Inventory - Finished Goods Manufacturing Cost - As per above working Cost of Goods available for Sale Less: Closing stock Cost of Goods sold Gross Profit Less: Operating expense Selling and administrative expenses $0 $3,660,000 $3,660,000 $1,220,000 $2,440,000 $460,000 SO $3,120,000 $360,000 $3,620,000 $150,000 $360,000 $340,000 $370,000 Operating Income $0 $120,000 $220,000