Question

Haas Company manufactures and sells one product. The following information pertains to each of the company's first three years of operations: 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 aan $ 240,000 $ 180,000 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 $52 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. Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Req ЗА Req 3B Compute the company's break-even point in unit sales. Break-even unit sales units Reg 1 Req 2A >

Answer 1

1)	Break even unit sales = total fixed cost/contribution margin
	total fixed cost
	fixed manufacturing overhead				240,000
	fixed selling & administrative				180,000
	total fixed cost				420,000
	contribution margin per unit
	Selling price per unit				52
	less variable cost
	Direct mterials			23
	direct labor			15
	VMOH			6
	Variable selling & adm expense			1	45
	contribution margin per unit				7
	Break even unit sales = 420,000/7
			60000	units	answer
2a)	unit product cost under variable costing
	Direct mterials			23
	direct labor			15
	VMOH			6
	total unit product cost			44
				year 1	year 2	year 3
	unit product cost			44	44	44
b)	Variable costing income statement
	units sold				60,000	50,000	65,000
					year 1	year 2	year 3
	sales				3120000	2600000	3380000
	variable expenses
	variable cost of goods sold				2640000	2200000	2860000
	variable selling & adm expense				60000	50000	65000
	total variable expense				2700000	2250000	2925000
	contribution margin				420000	350000	455000
	fixed xpenses:
	fixed manufacturing overhead				240,000	240,000	240,000
	fixed selling & adm expnes				180,000	180,000	180,000
	total fixed expense				420,000	420,000	420,000
	net income /loss				0	-70,000	35,000
3a)	Absorptiong costing
				year 1	year 2	year 3
	Direct mterials			23	23	23
	direct labor			15	15	15
	VMOH			6	6	6
	FMOH	(240000/units prod)		4	3.2	6
	total unit product cost			48	47.2	50
				year 1	year 2	year 3
	unit product cost			48	47.2	50
3b)	income statement
				year 1	year 2	year 3
	sales			3120000	2600000	3380000
	cost of goods sold			2880000	2360000	3180000
	gross margin			240000	240000	200000
	Selling and adm exp			240,000	230,000	245,000
	net income/loss			0	10,000	-45,000
	cost of goods sold for year 3 = 25000*47.2 + 40000*50
	year 2 = 50000*47.2
			year 1 = 60000*48