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Item 3

Item 3 0.75 points

Harris Company manufactures and sells a single product. A partially completed schedule of the company’s total costs and costs per unit over the relevant range of 64,000 to 104,000 units is given below:

Required:

1. Complete the schedule of the company’s total costs and costs per unit as given in the relevant tab below.

2. Assume that the company produces and sells 94,000 units during the year at a selling price of $9.04 per unit. Prepare a contribution format income statement for the year.

Assume that the company produces and sells 94,000 units during the year at a selling price of $9.04 per unit. Prepare a contribution format income statement for the year.

	Harris Company Contribution Format Income Statement

Answer 1

Required 1 :
Variable cost per unit = Total variable cost for 64000 units / 64000 = 179200 / 64000	2.80
Fixed cost will not change with the change in units produced and sold
	Units produced and Sold
	64000	84000	104000
Total costs :
Variable costs	179200	235200	291200
Fixed costs	440000	440000	440000
Total costs	619200	675200	731200
Cost per unit :
Variable cost ( Total variable cost / Units )	2.80	2.80	2.80
Fixed cost ( Total fixed costs / Units )	6.88	5.24	4.23
Total cost per unit ( Total costs / Units )	9.68	8.04	7.03

Required 2 :
Harris company
Contribution Format Income statement
Sales ( 94000 * 9.04 )	849760
(-) Variable costs ( 94000 * 2.80 )	263200
Contribution margin	586560
(-) Fixed costs	440000
Net income	146560