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 year's operations follow: Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: 10,300 8,900 1,400 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Total variable cost per unit 80 20 10 30 140 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative Total fixed costs $ 170,000 250,000 420,000 Required 1. Assume that the company uses variable costing. Compute the unit product cost for one barbecue grill ost 2. Assume that the company uses variable costing. Prepare a contribution format income statement for the year. Chuck Wagon Grills, Inc Variable Costing Income Statement Variable expenses Fixed expenses 3. What is the company's break-even point in terms of the number of barbecue grills sold? Break-even units nt

Explanation / Answer

1. Unit product cost = variable cost per unit = $140

2.

3. Break even point = Fixed cost / Contribution per unit

Contribution per unit = $534,000 / 8,900 = $60 per unit

Break even point = $420,000 / $60 = 7,000 units

Chuck Wagon Grills, Inc. Variable costing Income Statement Sale (8,900 units x $200) $1,780,000 Variable Expenses: Direct Material ($80 x 8,900) $712,000 Direct Labor($20 x 8,900) $178,000 Variable Manufacturing Overhead ($10 x 8,900) $89,000 Variable selling and admenstrative ($30 x 8,900) $267,000 $1,246,000 Contribution Margin $534,000 Fixed Expenses: Fixed Manufacturing Overhead $170,000 Fixed Selling and adminstrative $250,000 $420,000 Net Margin $114,000

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