Question

Waterloo Storage Products makes a four-drawer plastic storage cabinet on casters meant for use in garages and workshops. Each cabinet sells for $48. Data for last year's operations follow: Units in beginning inventory Units produced Units sold Units in ending inventory 23,400 20,700 2,700 $ Variable costs per unit: Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative vo ū= Total variable cost per unit Fixed costs: Fixed manufacturing overhead $ 79,000 Fixed selling and 114,000 administrative Total fixed costs $193,000 Required: 1. Assume that the company uses variable costing. Compute the unit product cost for one storage cabinet. Unit product cost $ 29

Answer 1

1 Unit Product cost if Company Uses Variable Costing Direct Material Direct Labor Variable Manufacturing Overhead Unit Product cost 29 Variable costing Income Statement $ 993,600 (20700 x 48) Less (23400 x 29) Sales Variable expense: Variable Cost of Goods Sold: Beginning Inventory Variable manufacturing costs Goods avaible for sale less: Ending Inventory Variable cost of goods sold Variable Selling & adm expense Contribution Margin Fixed Expense : Fixed Manufacturing Overhead Fixed Selling & administrative expense Net Operating Income (2700 x 29) 678,600 678,600 78,300 600,300 144,900 $ $ $ (20700 x 7) $ $ 745,200 248,400 less 79,000 114,000 $ $ $ 193,000 55,400 3 Break even units sales Sales price per unit Variable Cost per unit Contribution margin per unit $ $ Less 48.00 36.00 12.00 193,000 Divide Fixed Cost Contribution margin per unit Breakeven units sales 16083 units