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 26 Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year Pixed manufacturing overhead Fixed selling and administrative expenses 18 $ 390,000 150,000 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 soid 65,000 units. The selling price of the company's product is $62 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

Sol- - > company manufatures and sells one product. The companys first three years of operations. Vadiable costs per unit 926 manufaturing Direct materials Ditect labor Variable selling and admini -strative $ 3 जी Variable manufa ferying over heod. Füred costs per yeao: Fixed manuferlering overhead Fixed selling and administrati -ve expenses $390.000 $ 150.000, 1) The company s break even point in unit sales. Break even units Contribution margin per unit - Sales - variable co Sales - $ per unit $62 variable cost a Q G+18+6+3 = 53.

contribution margin pero unit = sales - Variable cost =$62-53 contribution margin per unit = $91 BEP in units BEP In units - Fixed cost /contribution morogin peg unit. fixed cost – Fixed manufatering overhead + fixed selling and administrative expenses, Fided cost = $ 390.000 + $150.000 Fixed cost = $540000] contribution margin pero unit$9 Fixed cost BEP TO units - contribution margin per unit $540000 $9 (BEP In units $60.000 a) fost year operations Pooduled GO.000 units and sold 60.000 units. > second year of operations Produced 75.000 writs and sold 50.000 units.

- 40.000 units and sold 65.000 third year. Produced enits. as selling price of company's Product is $62 per unit. variable costing system unit product cost (variable manufaturing cost) Year 1 = 2671876 yearl 250 year 2= 26+1876 Tyear 2-50 year 30 26 +18t6 Tyear 3=50 years 1 | year 2 year 3 unit product cost $50 Corsiable manufateroing (26+18+) (2671645) (26+48 +6) $50 $50 Cost)

2) B) Year 1 Year 2 Year 3 34,20000 Sales revenue 3205000 2850000 Variable expenses Direct material 1560000 13000001690000 41706D Direct Labor 1080000 900000 360000 300000 Variable manufateri 390000 og over hear Dolable selling and bola 65.000 60.000 50.000 Adrio Overhead 3315000. Total variable expenses 3060000 2550000 contribution morgin 340000 28333-1 368333 fixed expenses faed manufacturing over 390.000 390.000 390.000 -head pred selling and Admin 150.000 150.000 150.000 Overhead. Toto tored expenses 540000 540000 540000 Net operating income 1560000 910000 1435000 CLOSS)

The company uses absooption costing The unit Pooduct cost for year 1 year 2. and year 3. Absorption costing system. years 1 Year 2 year 2 Year 3 terit of Product cost $ 60 $ 58 $65 cost of Goods sold) 1996 8 +6 ($26 +18($26 +1876 +10) 6+ O Prepare the income for year 1 year 2, and statement year 3. year 1 year 2 years 3 sales revenue 3400000 2850000 3705000 cost of Goods sold. 3120000 2500000 370100 300000 35000D O Gross margin selling distribution over -head net income (LOSS) 300000 290000 305000 0 1 GOOOD - 305000