The following information relates to Axar Products for calendar year 2020, the company’s first year of operation:
Units produced…………………………………………………20,000
Units sold 18,000 Selling price per unit…………………$ 30
Direct material per unit…………………………………………$ 6
Direct labor per unit……………………………………………..$ 4
Variable manufacturing overhead per unit…………..$ 2
Variable selling cost per unit………………………………..$ 3
Annual fixed manufacturing overhead…………$160,000
Annual fixed selling and administrative expense………….$ 80,000
Required
a. Prepare an income statement using full costing.
b. Prepare an income statement using variable costing.
c. Using the variable costing income statement, calculate the company’s break-even point in sales dollars and in units. Can the break-even point be calculated easily using the full costing income statement? Why or why not?
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