The following information relates to Axar Products for calendar year 2011, 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?