Question

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 52,000 to 92,000 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

	Units Produced and Sold 52,000 72,000 92,000 Total costs: Variable costs $192,400 288,000 Fixed costs 310,000 Total costs $502,400 $288,000 $0 Cost per unit: Variable cost Fixed cost Total cost per unit $0.00 $0.00 $0.00

2. Assume that the company produces and sells 82,000 units during the year at a selling price of $9.01 per unit. Prepare a contribution format income statement for the year.

Complete the schedule of the company’s total costs and costs per unit as given in the relevant tab below. (Round the per unit variable cost and fixed cost to 2 decimal places.)

Assume that the company produces and sells 82,000 units during the year at a selling price of $9.01 per unit. Prepare a contribution format income statement for the year.

	Harris Company Contribution Format Income Statement Sales $968,420 Variable expenses Contribution margin Fixed expense Net operating income

Answer 1

Answer-

1)

First calculate the variable cost per unit:

Variable cost per unit = $192,400 / 52,000 units

= $3.70 per unit

	Units Produced & Sold
	52,000	72,000	92,000
Total Costs:
Variable Costs (72,000 units * $3.70 per unit); (92,000 units * $3.70 per unit) (a)	$192,400	$266,400	$340,400
Fixed Costs (b)	$310,000	$310,000	$310,000
Total Costs (a + b)	$502,400	$576,400	$650,400
Cost per unit:
Variable cost ($192,400 / 52,000 units) (c )	$3.70	$3.70	$3.70
Fixed Cost ($310,000 / 52,000 units); ($310,000 / 72,000 units); ($310,000 / 92,000 units) (d)	$5.96	$4.31	$3.37
Total Unit per Cost (c + d)	$9.66	$8.01	$7.07

* Fixed costs do not change when the number of units produced and sold are changed as fixed consts remaining constant and will incur.

** Fixed cost per unit will vary when goods produced and sold are vary.

*** Variable costs per unit remaining fixed but it varies in amounts.

2)

Harris Company
Contribution Format Income Statement
Sales Revenue (82,000 units * $9.01 per unit)	$738,820
Less: Variable Expenses (82,000 units * $3.70 per unit)	($303,400)
Contribution Margin	$435,420
Less: Fixed Expenses	($310,000)
Net Operating Income	$125,420