Haas Company manufactures and sells one product. The following information perta

Question

Haas Company manufactures and sells one product. The following information pertains to each of the company's first three years of operations: Variable costs per unit: Manufacturing. Direct materials $20 Direct labor $12 Variable manufacturing overhead $4 Variable selling and administrative $2 Fixed costs per year. Fixed manufacturing overhead $960,000 Fixed selling and administrative expenses $240,000 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 $58 per unit. Required: 1. Compute the company's break-even point in units sold Break-even unit sates 20 units 2. Assume the company uses variable costing: Compute the unit product cost for year 1, year 2. and year 3 Year 1 Year 2 Year 3 Unit product cost

Explanation / Answer

Calculation of Break Even Point:

Break Even Point in Units = Fixed cost / Contribution Per Unit

Contribution Per Unit:

Fixed Cost = 960,000 + 240,000 = $$1,200,000

Break Even Point = 1,200,000 / 20 = 60,000 Units

2a. Unit Product Cost:

Amount($) Sale Price 58 Less: Direct Material 20 Direct Labor 12 Variable Manufacturing O/H 4 Variable selling and administrative expenses 2 Contribution 20

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