Waterloo Storage Products makes a four-drawer plastic storage cabinet on casters
ID: 2396511 • Letter: W
Question
Waterloo Storage Products makes a four-drawer plastic storage cabinet on casters meant for use in garages and workshops. Each cabinet sells for $43. Data for last year's operations follow: Units in beginning inventory Units produced Units sold Units in ending inventory 24,600 21,300 3,300 Variable costs per unit Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative $10 12 4 Total variable cost per unit $ 32 Fixed costs Fixed manufacturing overhead Fixed selling and administrative $ 76,000 111,000 Total fixed costs $187,000 Required. 1. Assume that the company uses variable costing. Compute the unit product cost for one storage cabinet Unit product costExplanation / Answer
1.
Direct materials
$ 10.00
Direct labor
$ 12.00
Variable manufacturing overhead
$ 4.00
Unit product cost
$ 26.00
2.
Variable Costing Income Statement
Sales revenue ($43*21,300)
$ 915,900.00
Variable expenses
Variable cost of goods sold
Cost of production ($26*24,600)
$ 639,600.00
Add: Beginning inventory
$ 0.00
Cost of goods available for sale
$ 639,600.00
Less: Ending inventory ($43*3,300)
$ 141,900.00
Variable cost of goods sold
$ 497,700.00
Variable selling and administrative ($6*21300)
$ 127,800.00
Total variable expenses
$ 625,500.00
Contribution margin
$ 290,400.00
Fixed expenses
Fixed manufacturing overhead
$ 76,000.00
Fixed selling and administrative
$ 111,000.00
Total fixed expenses
$ 187,000.00
Net income
$ 103,400.00
3.
Break even unit sales = Total fixed costs/Contribution margin per unit
Contribution margin per unit = Selling price per unit – Variable cost per unit
Contribution margin per unit = $43 - $32 = $11 per unit
Break even unit sales = $187,000 / $11 per unit = 17,000 units
Direct materials
$ 10.00
Direct labor
$ 12.00
Variable manufacturing overhead
$ 4.00
Unit product cost
$ 26.00
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