value 10.00 points Haas Company manufactures and sells one product. The followin
ID: 2539926 • Letter: V
Question
value 10.00 points 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 Direct materials $25 $17 $8 $3 Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year Fixed manufacturing overhead 150,000 90,000 Fixed selling and administrative expenses 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 $57 per unit Required: 1. Compute the company's break-even point in units sold Answer is complete and correct. 0 Type here to search
Explanation / Answer
Req 1: Selling price per unit: $ 57 variable cost per unit (25+17+8+3)= $ 53 Contribution margin per unit: Selling price - Variable cost =$57 -53 = $4 Total fixed cost: $ 150,000+90,000 = $240,000 Break even point in Units: Fixed cost / Contribution margin per unit ($240,000 /4) = 60,000 units Break even units 60,000 units Req 2: The Absorption Costing Unit Product Cost Year 1 Year 2 Year 3 Direct Material 25 25 25 Direct labour 17 17 17 Variable Manufacturing overheads 8 8 8 Fixed Manufacturing overheads 2.50 2.00 3.75 Absorption costing unit prroduct cost 52.50 52.00 53.75 The Absorption Costing Income Statement Year 1 Year 2 Year 3 Sales @$57 $3,420,000 $2,850,000 3705000 Cost of Goods sold 3150000 2600000 3450000 Gross Margin $270,000 $250,000 $255,000 Selling and distribution expense 270,000 240,000 285000 Net operating income 0 10,000 -30000 Note: COGS in Year-3 is: Costt of current year production of 40,000 units @53.75 2150000 Cost of Ending inventory of last year 25000 units @52 1300000 Total cost of goods sold in Year-3 3,450,000
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