Haas Company manufactures and sells one product. The following information perta
ID: 2561223 • 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 $21 $13 $4 $2 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses $330,000 $ 150,000 During its first year of operations, Haas produced 40,000 units and sold 40,000 units. During its second year of operations, it produced 55,000 units and sold 30,000 units. In its third year, Haas produced 20,000 units and sold 45,000 units. The selling price of the company's product is $52 per unit. Required 1. Compute the company's break-even point in units sold Break-even unit sales 40,000 units 2. Assume the company uses variable costing a. Compute the unit product cost for year 1, year 2, and year 3 Year 1 Year 2 Year 3 Unit product cost$ 38 $ 38 $ 38Explanation / Answer
ANSWER 1
Contribution per unit
Selling price per unit
52
Direct material
21
Direct labor
13
Variable manufacture overhead
4
Variable selling and administrative
2
Total variable cost per unit
40
Contribution per unit (52-40)
12
Total fixed cost
Fixed manufacture overhead
330000
Fixed selling and administrative
150000
Total fixed cost
480000
Break-even unit sales = fixed costs/contribution per unit = 480000/12 = 40000 units
ANSWER 2
HAAS COMPANY
Variable costing income statements
Year
1
2
3
Unit sold
40000
30000
45000
Sales vale
2080000
1560000
2340000
Variable cost (for unit sold)( if you take variable cost for unit produced then adjustment require for inventory. So, it is better find variable cost of unit sold.)
Material cost
840000
630000
945000
Labor cost
520000
390000
585000
Variable manufacturing overhead
160000
120000
180000
Variable selling & administrative overhead
80000
60000
90000
Total variable cost
1600000
1200000
1800000
Contribution margin (sales value- total variable cost)
480000
360000
540000
Fixed cost
Fixed manufacture overhead
330000
330000
330000
Fixed selling and administrative
150000
150000
150000
Total fixed cost
480000
480000
480000
Net operating profit (-loss)
0
-120000
60000
Unit product cost as per variable costing
Year
1
2
3
Total variable cost
1600000
1200000
1800000
Total fixed cost
480000
480000
480000
Total cost
2080000
1680000
2280000
Unit sold
40000
30000
45000
Unit product cost
$52.00
$56.00
$50.67
Answer 3
Statements of cost of goods sold
Unit produced
40000
55000
20000
Unit sold
40000
30000
45000
Year
1
2
3
Direct material cost
840000
1155000
420000
Direct labor cost
520000
715000
260000
Prime cost
1360000
1870000
680000
Manufacturing overhead
Variable manufacturing overhead
160000
220000
80000
Fixed manufacturing overhead
330000
330000
330000
Work cost
1850000
2420000
1090000
Opening inventory [value of beginning inventory of third year is value of closing inventory of second year]
0
0
1100000
Less closing inventory ( as per FIFO method) [second year = (2420000/55000)*25000 = 1100000]
0
-1100000
0
Cost of goods sold
1850000
1320000
2190000
Selling & administrative expenses
Variable selling overhead
80000
60000
90000
Fixed selling & administrative overhead
150000
150000
150000
Selling & administrative expenses
230000
210000
240000
HAAS COMPANY
Absorption costing income statements
Year
1
2
3
Sales
2080000
1560000
2340000
Cost of goods sold
1850000
1320000
2190000
Gross margin
230000
240000
150000
Selling & administrative expenses
230000
210000
240000
Net operating profit / (loss)
0
30000
-90000
Unit product cost as per Absorption costing
Year
1
2
3
Cost of goods sold
1850000
1320000
2190000
Selling & administrative expenses
230000
210000
240000
Total cost of sales
2080000
1530000
2430000
Unit sold
40000
30000
45000
Unit product cost
$52.00
$51.00
$54.00
Selling price per unit
52
Direct material
21
Direct labor
13
Variable manufacture overhead
4
Variable selling and administrative
2
Total variable cost per unit
40
Contribution per unit (52-40)
12
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