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CompuDesk, Inc.

CompuDesk, Inc., makes an oak desk specially designed for personal computers. The desk sells for $200. Data for last year's operations follow:

Units 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
Variable Manufacturing Overhead $10
Variable Selling and Administrative $20
Total Variable Cost per Unit $120

Fixed Costs:
Fixed Manufacturing Overhead $300,000
Fixed Selling and Administrative $450,000
Total Fixed Costs $750,000

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

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

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

Solution Preview

CompuDesk, Inc., makes an oak desk specially designed for personal computers. The desk sells for $200. Data for last year's operations follow:

Units 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
Variable Manufacturing Overhead $10
Variable Selling and Administrative $20
Total Variable Cost per Unit $120

Fixed Costs:
Fixed Manufacturing Overhead ...

$2.19