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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 $ 460,000 $ 240,000 During its first year of operations, Haas produced 100,000 units and sold 100,000 units. During its second year of operations, it produced 115,000 units and sold 90,000 units. In its third year, Haas produced 80,000 units and sold 105,000 units. The selling price of the company's product is $58 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.

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Answer 1

DATA Year 1 Year 2 o Year 3 25000 80000 105000 100000 100000 Opening Inventory Units Produced Units Sold Closing Inventory Selling Price per unit Variable Selling and Administrative Expenses 115000 90000 25000 58 58 58 Fixed Manufacturing Overheads Fixed Selling And Distribution Overheads 460000 240000 460000 240000 460000 240000 Selling price Variable Cost per unit (27+19+3+2) Contribution Margin Fixed Cost (460000+240000) Break Even Units = ( Fixed cost / CM per unit) 58 51.00 7.00 700000 100000 Units Year 2 Year 3 27 27 2. Calculation of Unit cost Under Variable Costing Year 1 Direct Material Direct Labour Variable Manufacturing Overhead Unit Product Cost 49.00 19 19 19 49.00 49.00

2a Units Product Cost Under Variable Costing Year 1 49.00 Year 2 49.00 Year 3 49.00 Unit Product Cost Income Statement Under Variable Costing Year 1 5800000 Year 2 Year 3 5220000 6090000 Sales (@49) Variable Expense Variable Cost Of Goods Sold @58 Variable Selling and Administrative Expenses(@2) Total Varible Expenses Contribution Magin Fixed Expenses Fixed mufacturing Overheads Fixed Sellingand Administrative Expenses Total fixed Expenses Net Operating Income 4900000 200000 5100000 700000 4410000 5145000 180000 210000 4590000 5355000 630000 735000 460000 240000 7000001 460000 240000 700000 -70000 460000 240000 700000 35000

Assume the Absorption costing 3. Calculation of Unit cost Under Absorption Costing Year 1 Year 2 Year 3 Direct Material Direct Labour Variable Manufacturing Overhead 31 Fixed Manufacturing Over head, 4.6 5.75 Units Product Cost 53.60 53.00 54.75 3a) Units Product Cost Under absorption Costing Year 1 Year 2 Year 3 Unit Product Cost 53.60 53.00 54.75 3.b Income Statement Under Absorption Costing Year 1 Year 2 Year 2 Sales Cost of Goods Sold Gross Margin Selling and Administrative Overheads (Variable +Fixed) Net Operating Income 58000005220000 6090000 5360000 4770000 5705000 440000 450000 385000 440000 420000 450000 0 30000 -65000