Question

Harris Company manufactures and sells a single product.

Required:

1.	A partially completed schedule of the company’s total and per unit costs over the relevant range of 55,000 to 95,000 units produced and sold annually is given below: Complete the schedule of the company’s total and unit costs. Round the variable cost and fixed cost to 2 decimal places.)

	Units Produced and Sold 55,000 75,000 95,000 Total costs: Variable costs $181,500 Fixed costs 370,000 Total costs $551,500 Cost per unit: Variable cost Fixed cost Total cost per unit

     

2.	Assume that the company produces and sells 85,000 units during the year at a selling price of $9.23 per unit. Prepare a contribution format income statement for the year. (Do not round intermediate calculations.)

	Harris Company Contribution Format Income Statement

Answer 1

Units Produced and Sold
	55,000	75,000	95,000
Total costs:
Variable costs	$181,500	75,000 x 3.3 = 247,500	95,000 x 3.3 = 313,500
Fixed costs	370,000	370,000	370,000
Total costs	$551,500	$617,500	$683,500
Cost per unit:
Variable cost	181,500/55,000 = 3.3	3.3	3.3
Fixed cost	370,000/55,000 =6.73	370,000/75,000 = 4.93	370,000/95,000 = 3.89
Total cost per unit	10.03	8.23	7.19

Formula used:

Fixed cost per unit = Total fixed cost / Number of units

Variable cost per unit = Total variable cost / Number of units

Total variable cost = Variable cost per unit x Number of units

Harris Company Contribution Format Income Statement Sales ( 85,000 x 9.23) 784,550 Variable cost (85,000 x 3.3) 280,500 Contribution margin 504,050 Fixed cost -370,000 Operating Profit $134,050