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    Cost Classification/Target Profit

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    Bart's Wood Work Company

    Assume that the company keeps no inventories. Below is information that pertains to Bart's Wood Work Company for the past year.

    Based on this information prepare a financial accounting income statement (that is in the required GAAP for US external reporting).

    From this information make appropriate assumptions about cost behavior and assume that the direct labor costs vary directly with the number of units produced. How many units must the company sell in order to earn a pretax profit of $500,000.00?

    Bart's Wood Work Company

    Units produced and sold 50,000
    Sales price per unit $70
    Labor to make shelves 600,000
    Wood to make shelves 450,000
    sales staff salaries 80,000
    Office and show room rental expense 150,000
    Depreciation on carpentry equipment 50,000
    Advertising 200,000
    Sales Commissions based on units sold 180,000
    Misc. fixed manufacturing over head (support) 150,000
    Rent for the building where the shelves are made 300,000
    Misc. variable manufacturing overhead (support) 350,000
    Depreciation for office equipment 10,000

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    Solution Summary

    The solution explains how to classify costs as fixed and variable and then to calculate units to be sold to generate a target profit