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 $200. Data for last year’s operations follow:

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

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

Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it sells for $200. Data for last year’s operations follow:

Explanation / Answer

Answer 1 Unit product cost under variable costing Particulars in $ Direct material cost per unit 80 Direct Labour cost per unit 20 Variable manufacturing overhead per unit 10 Cost per unit under variable costing 110 Fixed cost and Variable selling & admin cost are not considered under variable costing Answer 2 Contribution format Income statement Particulars In $ Sales(200 *8500 units) 1700000 Less : Variable production cost 935000 Contribution 765000 Less : Fixed Mfg Overhead Cost 160000 Less : Fixed selling & admin Overhead Cost 170000 Less : Variable selling & admin cost 255000 Net Income 180000 Answer 3 Contribution per Unit = Contribution / no.of units sold = 765000 / 8500 = $90 per unit Break-even point = Fixed cost / Contribution per unit = 330000 / 90 = 3667 units

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