Problem
VARIABLE AND ABSORPTION COSTING AND BREAKEVEN POINTS. Let It Snow, LLC (LIB) manufactures snowboards. LIS began 2020 with an inventory of 250 boards. During the year, it produced 1,200 boards and sold 1,400 for $300 each. Fixed production costs were $169,020, and variable production costs were $112 per unit. Fixed advertising, marketing, and other general and administrative expenses were STE, 000, and variable shipping costs were $20 per board. Assume that the cost of each unit in beginning inventory is equal to 2020 inventory cost. LIS uses a denominator level of 1,200 units.
Task
I. Prepare an income statement assuming LIE uses variable costing.
II. Prepare an income statement assuming LIE uses absorption costing. Production-volume variances are written off to cost of goods sold.
III. Compute the breakeven point in units sold assuming LIS uses the following methods. Provide proof of your breakeven calculations.
i. Variable costing
ii. Absorption costing