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: Units in beginning inventory 0 Units produced 9,500 Units sold 8,700 Units in ending inventory 800 Variable costs per unit: Direct materials $ 60 Direct labor 40 Variable manufacturing overhead 10 Variable selling and administrative 30 Total variable cost per unit $ 140 Fixed costs: Fixed manufacturing overhead $ 150,000 Fixed selling and administrative 970,000 Total fixed costs $ 1,120,000 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?

Explanation / Answer

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.

Break even point = 1120000/(300-140) = 7000 units

Variable costing Direct material 60 Direct labour 40 Variable manufacturing overhead 10 Unit product cost 110

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