DeskMaster Corp. Makes a desk specially designed for personal computers. The des

Question

DeskMaster Corp. Makes a desk specially designed for personal computers. The desk sells for $200. Data for last year's operations follow:

1. Assume that the company uses variable costing. Compute the unit product cost for one computer desk.

Prepare a contribution format income statement for the year.

What is the company's break-even point in terms of units sold?

Units in beginning inventory 0 Units produced 10,000 Units sold 9,000 Units in ending inventory 1,000 Variable costs per unit Direct Materials $                  40 Direct Labour $                  35 Variable manufacturing overhead $                  10 Variable selling and administrative $                  25 Total variable cost per unit $                110 Fixed costs Fixed manufacturing overhead $        300,000 Fixed selling and administrative $        450,000 Total fixed costs $        750,000

Explanation / Answer

Direct materials 40 Direct labour 35 Variable manufacturing overhead 10 Unit product cost 85 Income statement Sales (9,000 × $200) 18,00,000 Variable expenses: Variable cost of goods sold: Beginning inventory 0 Add variable manufacturing costs (10,000 units 8,50,000 Goods available for sale: 8,50,000 Less ending inventory (1,000 units × $85 per unit) 85,000 Variable cost of goods sold (9,000 units sold × $85 7,65,000 Variable selling and administrative (9,000 units × $25 ) 2,25,000 9,90,000 Contribution margin 8,10,000 Fixed expenses: Fixed manufacturing overhead 3,00,000 Fixed selling and administrative 4,50,000 7,50,000 Operating profit $60,000 Selling price per unit 200 Variable product cost per unit 85 Variable selling and admin cost per unit: 25 110 Contribution 90 Fixed Cost 7,50,000 break-even point in terms of units sold 750000/90 8334

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