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Cost Classification/Target Profit

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

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

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