Question

Haas Company manufactures and sells one product. The following information pertains to each of the company's first three years of operations: A $ $ $ 22 14 5 A 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 w 3 A $270,000 210,000 During its first year of operations, Haas produced 60,000 units and sold 60,000 units. During its second year of operations, it produced 75,000 units and sold 50,000 units. In its third year, Haas produced 40,000 units and sold 65,000 units. The selling price of the company's product is $52 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. Reg 1 Req 2A Req 2B Req 3A Req 3B Compute the company's break-even point in unit sales. Break-even unit sales units Req 1 Req 2A >

Answer 1

From the information given above, I have prepared break even sales in units, unit product cost, income statement using variable costing & Absorption costing.

1 Hass Company 2 3 From the information given in the problem 52 22 5 Selling Price 6 Less: Variable cost 7 Direct Materials 8 Direct labor 9 Variable manufacturing overhead 10 Variable selling & administrative 11 Contribution per unit 12 13 Fixed maufacturing overhead 14 Fixed selling & administrative 15 Total Fixed cost w 00 270000 210000 480000 16 17 1. Calculation of Company's break even point in units sales 18 19 Break even point in unit sales – Fixed cost Contribution per unit 480000 60000 units

1 н MN 2b. Income Statement using variable costing 1 2. Assume company uses variable costing 2 3 2a. Calculation of unit product cost for year 1, year2, Year3 using variable costing 5 Year1 Year 2 Year 3 6 Direct Materials 7 Direct labor 8 Variable manufacturing overhead 9 Unit product cost 22 14 5 41 22 14 5 41 22 14 5 41 Hass Company Variable costing Income Statement Sales in units 60000 50000 65000 Pariculars per unit Year 1 Year 2 Year 3 Selling Price 52 3120000 2600000 3380000 Less: Variable cost Direct Materials 22. 1320000 1100000 1430000 Direct labor 840000 700000 910000 Variable manufacturing overhead | 5 300000 325000 Variable selling & administrative 180000 150000 195000 Total variable cost 2640000 2200000 2860000 10 11 In variable costing, fixed cost is expensed in the period incurred. 14 12 13 16 480000 400000 520000 12 18 Contribution Less: Fixed cost Fixed maufacturing overhead Fixed selling & administrative Total Fixed cost Profit/Loss for the period 19 270000 210000 480000 0 270000 210000 480000 -80000 270000 210000 480000 40000 20 23 24

T U V W Z AA AB AC 1 3. Assume company uses Absorption costing 3b. Income Statement using Absorption costing 3 3a. Calculation of unit product cost for year 1, year2, Year3 using Absorption costing Hass Company Absorption costing Income Statement Production in units 60000 75000 40000 Year 1 Year 2 Year 3 22 22 14 14 14 5 5 4.51 3.6 6.75 270000 270000 270000 60000 75000 40000 Sales in units 60000 50000 65000 Year 1 Year 2 Year 3 3120000 2600000 3380000 2730000 2230000 3025000 390000 370000 355000 8 Direct Materials 9 Direct labor 10 Variable manufacturing overhead 11 Fixed manufacturing overhead 12 Fixed manufacturing cost Units produced 14 15 Unit product cost Pariculars per unit Selling Price Less: Cost of goods sold Gross profit Less: Operating expenses Variable selling & administrative Fixed selling & administrative Net Operating profit/Loss 13 180000 210000 150000 210000 10000 195000 210000 -50000 45.5 44.6 47.75 Calculation of cost of goods sold Sales in units 60000 50000 65000 Year 1 Year 2 Year 3 Opening balance 0 1115000 Add: Production 2730000 3345000 1910000 units produced* unit product cost (60000*45.5) (75000*44.6) (40000*47.75) Less: Closing balance 1115000 (produced - sold) (25000*44.6) Cost of goods sold 2730000 2230000 3025000 22 Note: refer solution 3a for unit product cost