Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue g
ID: 2432100 • Letter: C
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:
Required:
1. Assume that the company uses variable costing. Compute the unit product cost for one barbecue grill.
Unit product cost____________
2. Assume that the company uses variable costing. Prepare a contribution format income statement for the year.
Explanation / Answer
Answer:
1
Assume that the company uses variable costing. Compute the unit product cost for one barbecue grill.
Answer: Unit product cost_____$110_______
Working notes for the above answer is as under
Calculation for Unit product cost under variable costing
Amount $
Direct Material
60
Direct Labor
40
variable Manufacturing Overhead
10
unit product cost as per variable costing
110
Unit product cost_____$110_______
___________________________________
2
Chuck Wagon Grills, Inc.
Variable Costing Income Statement
Sales (8800*200)
1760000
Variable expenses:
Cost of goods sold (8800*110)
968000
Selling and admin (8800*30)
264000
Total variable cost
1232000
Contribution margin
528000
Fixed expenses:
Fixed manufacturing overhead
180,000
Fixed selling and administrative
330,000
Total Fixed expenses
510,000
Net operating income
18,000
Amount $
Direct Material
60
Direct Labor
40
variable Manufacturing Overhead
10
unit product cost as per variable costing
110
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