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# Variable Costing Unit Product Cost and Income Statement

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I have attempted to figure out the first two problems. I just need to compare my anwers so see I they match. I am not sure how to figure out problem #3, so I need a step-by- step solution.

Desktec, Inc. makes an oak desk for personal computers. The desk sells for \$200. Data for last year's operations are:

Units at beginning inventory 0
Units produced 10,000
Units sold 9,000
Units in ending inventory 1,000
Variable costs per unit:
Direct materials \$60
Direct labor 30
Total variable cost per unit \$120
Fixed costs:
Total fixed costs \$750,000

1. Assume that the company uses variable costing. Compute the unit product cost for one computer desk.

Direct materials \$60.00
Direct labor 30.00
Unit product cost \$100.00

2. Assume that the company uses variable costing. Prepare an income statement for the year using the contribution format.

INCOME STATEMENT

Sales (9,000 units X \$10) 90,000
Less variable expenses
Variable cost of goods sold:
Beginning inventory 0
(10,000 X \$100 per unit)
Goods available for sale 1,000,000
Less ending inventory (1,000 X \$100 per unit) 100,000
Variable cost of good sold 900,000
(9,000 X \$100 per unit) 90,000 990,000
Contribution margin 990,000
Less fixed expenses:
Fixed selling and administrative 450,000 750,000
Net operating income \$240,000

3. What is the company's break-even point in terms of units sold?

#### Solution Preview

Sales 9,000X200=1,800,000
Variable Cost 900,000
Variable Selling (9,000X20)=180,000
Total variable cost 1,080,000
Contribution Margin = 720,000
Fixed Cost 750,000
Net ...

#### Solution Summary

The solution explains the calculation of unit cost and preparation of an income statement under variable costing and the determination of breakeven point.

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