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 $200. Data for last years operations follow: Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: 9,800 8,700 1,100 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Total variable cost per unit 80 40 10 30 160 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative Total fixed costs 160,000 200,000 360,000 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

a) Unit product cost :

b) Variable costing income statement:

3) Break even point = FIxed cost/contribution margin per unit

                             = 360000/40

Break even point = 9000 units

Contribution margin per unit = (200-160) = 40 per unit

Unit product cost Direct material 80 Direct labour 40 Variable overhead cost 10 Unit product cost 130

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