Haas Company manufactures and sells one product. The following information perta
ID: 2451556 • 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: Variable costs per unit: Manufacturing $30 $22 $6 $2 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year Fixed manufacturing overhead Fixed selling and administrative expenses $540,000 $240,000 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 $73 per unit.Explanation / Answer
Absorption costing
In absorption costing all fixed expenses are included.
3.
Year 1
Number of units sold =60,000
Variable cost per unit =60 per unit
Fixed cost =780,000
Fixed cost per unit =780,000/60,000=13
Cost per unit =73
Year 2
Number of units sold =50,000
Fixed cost per unit =780,000/50,000 =15.6
Cost per unit =75.6
Year 3
Number of units sold =65000
Fixed cost per unit=780000/65000=12
Cost per unit =72
Absorption costing income statement
Year 1 Year 2 Year 3
Sales 4,380,000 3,650,000 4,745,000
Cost of goods sold 4,380,000 3,780,000 4,680,000
Profit/Loss 0 1,30,000 65,000
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