Question

Harris Company manufactures and sells a single product.

1.

A partially completed schedule of the company’s total and per unit costs over the relevant range of 53,000 to 93,000 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 & Sold 53000 73000 93000 Total Costs Variable Costs $180,200 ? ? Fixed Costs 390,000 ? ? Total Costs $570,200 ? ? Cost per Unit Variable Cost ? ? ? Fixed Cost ? ? ? Total Unit per Cost ? ? ? 2. Assume that the company produces and sells 83,000 units during the year at a selling price of $8.97 per unit. Prepare a contribution format income statement for the year. Harris Company Contribution Format Income Statement Sales ? Variable Expenses ? Contribution Margin ? Fixed Expense ? Net Operating Income ?

Answer 1

Schedule of the company’s total and unit costs.

	Units	Produced &	Sold
	53000	73000	93000
Total Costs
Variable Costs	$180,200	$248,200	$316,200
Fixed Costs	390,000	390,000	390,000
Total Costs	$570,200	$638,200	$706,200
Cost per Unit
Variable Cost	3.4	3.4	3.4
Fixed Cost	7.36	5.34	4.19
Total Unit per Cost	10.76	8.74	7.59

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

= 180,200/53,000

= $3.4

Total variable cost at 73,000 units = 73,000 x 3.4

= $248,200

Total variable cost at 93,000 units = 93,000 x 3.4

= $316,200

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

Fixed cost per unit at 53,000 units = 390,000/53,000

= $7.36

Fixed cost per unit at 73,000 units = 390,000/73,000

= $5.34

Fixed cost per unit at 93,000 units = 390,000/93,000

= $4.19

2.	contribution format income statement Harris Company Contribution Format Income Statement Sales 744,510 Variable Expenses (282,200) Contribution Margin 462,310 Fixed Expense (390,000) Net Operating Income 72,310