Question

The folowing hbrmation applies to the questions displayed below Dlego Compeny manufactures operations in which it produced 44,000 units and sold 39,000 units one product thet is sold for $73 per unit in two geographic regions-the East and West regions. The following information pertains to the company's trst year arabie costs per un Direct terials ect abor Valabie seling and edministrarive costs per year 748,000 400,000 The company sold 290 Oun sĩ, the East re on and 1 000 units in the West region. t deterred that SBO OO ofits ted seling ond 0 i tra iveexpe ses ,rceable to the west egion $130.000 is taceable to the East region, and the remaining $90,000 is a common fxed cost. The company will continue to incur the total amount of its fixed manufacturing overhead ots es long s it continues to produce any omount of its only product Requed information 5.00 pi net operating income (loss) under variable costing?

Answer 1

Solution 4:

Variable manufacturing cost per unit = Direct material + Direct labor + Variable manufacturing overhead

= $23 + $16 + $2 = $41 per unit

Diego Company
Contribution margin income statement For the Quarter ended June 30
Particulars	Per unit	Amount
Sales	$73.00	$2,847,000.00
Variable Cost:
Variable manufacturing cost	$41.00	$1,599,000.00
Variable Selling and Administrative Expenses	$4.00	$156,000.00
Contribution	$28.00	$1,092,000.00
Fixed Manufacturing Overhead		$748,000.00
Fixed Selling & Administrative Expenses		$400,000.00
Net Income		-$56,000.00

Solution 8a:

Company's breakeven point in unit sales = Fixed costs / Contribution margin per unit

= $1,148,000 / $28 = 41000 units

Solution 8b:

Breakeven sales volume is above the actual sales volume.