Waterloo Storage Products makes a four-drawer plastic storage cabinet on casters

Question

Waterloo Storage Products makes a four-drawer plastic storage cabinet on casters meant for use in garages and workshops. Each cabinet sells for $54. Data for last year’s operations follow:

Assume that the company uses variable costing. Compute the unit product cost for one storage cabinet.

Assume that the company uses variable costing. Prepare a contribution format income statement for the year.

What is the company’s break-even point in terms of units sold? (Round your answer to the nearest whole number.)

     Units in beginning inventory 0   Units produced 21,200   Units sold 19,600   Units in ending inventory 1,600   Variable costs per unit:      Direct materials $ 12      Direct labour 14      Variable manufacturing overhead 6      Variable selling and administrative 8      Total variable cost per unit $ 40      Fixed costs:      Fixed manufacturing overhead $ 84,500      Fixed selling and administrative 119,500      Total fixed costs $ 204,000   

Explanation / Answer

1. Unit Product Cost = Direct Material + Direct Labour + Variable Manuf OH + Variable S & A

= 12 + 14 +6 +8

= 40

2.

3. Breakeven Sales

PX = VX + FC

54*X = 40*X +204000

X = 14571.42

# P= Price per unit

X= No. of units sold

V= Variable cost per unit

FC= Total Fixed Cost

Contribution Format Income Statement Sales 19600*54    1058400 Less Variable Cost 19600*40 784000 Contribution Margin 274400 Less Direct Fixed Expenses 84500+119500 204000 Net Profit 70400

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