Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue g

Question

Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it sells for $300. Data for last year’s operations follow:

  

Required:

1. Assume that the company uses variable costing. Compute the unit product cost for one barbecue grill.

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

3. What is the company’s break-even point in terms of the number of barbecue grills sold?

Units in beginning inventory 0 Units produced 9,900 Units sold 8,800 Units in ending inventory 1,100 Variable costs per unit: Direct materials $ 60 Direct labor 20 Variable manufacturing overhead 10 Variable selling and administrative 30 Total variable cost per unit $ 120 Fixed costs: Fixed manufacturing overhead $ 180,000 Fixed selling and administrative 720,000 Total fixed costs $ 900,000 Complete this question by entering your answers in the tabs below. Required 1Required 2Required 3 Assume that the company uses variable costing. Compute the unit product cost for one barbecue grill Unit product cost Required1 Required 2>

Explanation / Answer

1) when the company is using variable costing, the unit product cost is: Per Unit Direct Material 60 Direct Labor 20 Varaible Manufacturing overhead 10 Total Unit Product cost $90 2) the contribution format income statement for last year: Units sold 8800 Per Unit Amount $ Sales 300 2640000 Less: Variable costs: Direct Materials 60 528000 Direct Labor 20 176000 Variable Manuf overhead 10 88000 Variable selling and admin 30 264000 Total variable costs 120 1056000 Contribution 180 1584000 Less: Fixed costs: Manufacturing overhead 180000 Selling and admin 720000 Total Fixed Costs 900000 Net Operating Income $684000 3) Bread even point in units = Fixed cost / Contribution per unit 900000 / 180 = 5000 units

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