Haas Company manufactures and sells one product. The following information perta
ID: 2335549 • Letter: H
Question
Haas Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations:
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 $57 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.
Variable costs per unit: Manufacturing: Direct materials $ 21 Direct labor $ 13 Variable manufacturing overhead $ 8 Variable selling and administrative $ 1 Fixed costs per year: Fixed manufacturing overhead $ 600,000 Fixed selling and administrative expenses $ 240,000Explanation / Answer
1 Variable costs per unit = 21+13+8+1= $43 Fixed costs per year = 600000+240000 = $840000 Break-even point in unit sales = Fixed costs/Unit contribution margin = 840000/(57-43)= 60000 2a Year 1 Year 2 Year 3 Direct materials 21 21 21 Direct labor 13 13 13 Variable manufacturing overhead 8 8 8 Unit product cost 42 42 42 b Variable Costing Income Statement Year 1 Year 2 Year 3 Sales 3420000 2850000 3705000 Variable expenses: Variable cost of goods sold 2520000 2100000 2730000 Variable selling and administrative 60000 50000 65000 Total variable expenses 2580000 2150000 2795000 Contribution margin 840000 700000 910000 Fixed expenses: Fixed manufacturing overhead 600000 600000 600000 Fixed selling and administrative 240000 240000 240000 Total Fixed expenses 840000 840000 840000 Net operating income 0 -140000 70000 3a Year 1 Year 2 Year 3 Direct materials 21 21 21 Direct labor 13 13 13 Variable manufacturing overhead 8 8 8 Fixed manufacturing overhead 10 8 15 Unit product cost 52 50 57 3b Absorption Costing Income Statement Year 1 Year 2 Year 3 Sales 3420000 2850000 3705000 Cost of goods sold 3120000 2500000 3530000 Gross margin 300000 350000 175000 Selling and administrative expenses 300000 290000 305000 Net operating income 0 60000 -130000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.