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# Variable / Absorption costing - income statement

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Chuck Wagon Grills, Inc., makes a single product - a handmade specialty barbecue grill that it sells for \$210. Data for last year's operations follow:

Units in beginning inventory 0
units produced 20,000
units sold 19,000
units in ending inventory 1,000

Variable costs per unit:
Direct materials \$50
Direct Labor 80

Total variable cost per unit \$160

Fixed Costs:

Total Fixed Costs \$985,000

1. Assume the company uses variable costing. Compute the unit product cost for one barbecue grill.
2. Assume 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 of the number of barbecue grills sold?

Refer to the data above. Assume absorption costing is used:
1. Compute the product cost for one barbecue grill.
2. Prepare an income statement.

#### Solution Preview

Chuck Wagon Grills, Inc., makes a single product - a handmade specialty barbecue grill that it sells for \$210. Data for last year's operations follow:

Units in beginning inventory 0
units produced 20,000
units sold 19,000
units in ending inventory 1,000

Variable costs per unit:
Direct materials \$50
Direct Labor 80

Total variable cost per unit \$160

Fixed Costs: