UNITS PRODUCED AND SOLD 60,000 80,000 100,000 Total Costs: Variable costs $150,0

Question

UNITS PRODUCED AND SOLD
60,000 80,000 100,000
Total Costs:
Variable costs $150,000 $200,000 $250,000
Fixed costs $360,000 $360,000 $360,000
Total Cost $510,000 $560,000 $610,000

Cost per unit:
Variable cost $2.50 $2.50 $2.50
Fixed cost $6.00 $4.50 $3.60
Total cost per unit $8.50 $7.00 $6.10

Assume that the company produces and sells 90,000 units during the year at a selling price of $7.50 per unit. Prepare a contribution margin income statement.

Help with this:

Revenue $675,000
Less: Variable cost
Contribution Margin $663,000
Less: Fixed cost
Operating Income

I need help with the calculating the variable cost and fixed cost. I am guessing it's the cost per unit multiplied by the units produced... but do I calculate all of the units for the year? Also, for the fixed cost... seems like that should be reversed (the numbers), do I just take all 3 figures and average it out? Any help would be great.

Explanation / Answer

variable cost will be the SAME PER UNIT, no matter how many units.

using 60,000:

150,000/60,000 = $2.50 per unit

fixed cost will be the SAME IN TOTAL, no matter how many units so fixed cost = 360,000.

675,000 revenue
225,000 less variable cost (90,000*2.50)
450,000 contribution margin
360,000 less fixed cost
90,000 operating income

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