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 57,000 to 97,000 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 87,000 units during the year at a selling price of $10.87 per unit. Prepare a contribution format income statement for the year.

Answer 1

1.

Units produced and sold

	57,000	77,000	97,000
Total costs:
Variable costs	$222,300	$300,300	$378,300
Fixed costs	$460,000	$460,000	$460,000
Total costs	$682,300	$760,300	$838,300
Cost per unit
Variable cost	$3.9	$3.9	$3.9
Fixed cost	$8.07	$5.97	$4.74
Total cost per unit	$11.97	$9.87	$8.64

Variable cost per unit =$222,300/57,000=$3.9

Variable cost per unit doesn't change with units

Fixed cost doesn't change =$460,000

2.

Contribution format income statement

Sales (87,000×$10.87)	$945,690
Less: Variable costs(87,000×$3.9)	($339,300)
Contribution margin	$606,390
Less: Fixed costs	($460,000)
Net income	$146,390