Problem
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
|
9,700
|
|
Units sold
|
8,500
|
|
Units in ending inventory
|
1,200
|
|
Variable costs per unit:
|
|
|
Direct materials
|
$ 80
|
|
Direct labor
|
20
|
|
Variable manufacturing overhead
|
10
|
|
Variable selling and administrative
|
30
|
|
Total variable cost per unit
|
$ 140
|
|
Fixed costs:
|
|
|
Fixed manufacturing overhead
|
240,000
|
|
Fixed selling and administrative
|
960,000
|
|
Total fixed costs
|
1,200,000
|
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 the year.
3. What is the company's break-even point in terms of the number of barbecue grills sold?