Question

unit over the relevant range of 59,000 to 99,000 units is given below 2. Assume that the company produces and sells 89,000 units during the year at a selling price of $8.16 per unit. Prepare a for the year 59,000 360,000 513,400

Answer 1

1	Units produced and sold
		59000	79000	99000
	Total cost
	Variable cost	$ 1,53,400	$       2,05,400	$       2,57,400
	Fixed cost per year	$ 3,60,000	$       3,60,000	$       3,60,000
	Total costs	$ 5,13,400	$       5,65,400	$       6,17,400
	Costs per unit
	Variable cost per unit	$         2.60	$               2.60	$               2.60
	Fixed cost per unit	$         6.10	$               4.56	$               3.64
	Total cost per unit	$         8.70	$               7.16	$               6.24
	Workings:
	59000 units
	Variable cost per unit	=	$153400 /59000 units
		=	$               2.60
	Fixed cost per unit	=	$360000 /59000 units
		=	$               6.10
	79000 units
	Total Variable cost	=	79000 units X $2.60
		=	$       2,05,400
	Fixed cost per unit	=	$360000 /79000 units
		=	$               4.56
	99000 units
	Total Variable cost	=	99000 units X $2.60
		=	$       2,57,400
	Fixed cost per unit	=	$360000 /99000 units
		=	$               3.64
	Note: Fixed cost per year will remain same irrespective of number units whereas it will change in case of Fixed cost per unit also Variable cost per unit will remain same and it will change in total.
2	Contribution format Income statement
	Units produced and sold	89000
(a)	Sales (89,000 units X $8.16)	$ 7,26,240
Less:	Variable cost (89,000 units X $2.60)	$ 2,31,400
(b)	Total contribution margin	$ 4,94,840
Less:	Fixed cost per year	$ 3,60,000
	Net operating Income (loss)	$ 1,34,840