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A worksheet that explains and illustrates costs per unit

See the graphic in the attached file.

EXERCISE 5-6 Cost Behavior; Contribution Format Income Statement

Parker Company manufactures and sells a single product. A partially completed schedule of the company's total and per unit costs over a relevant range of 60,000 to 100,000 units produced and sold each year is given below:

Required:
1. Complete the schedule of the company's total and unit costs above.
2. Assume that the company produces and sells 90,000 units during the year at the selling price of $7.50 per unit. Prepare a contribution format income statement for the year.

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Solution Preview

Please see attached Excel file.

PARKER COMPANY

Variable costs are the costs that change as output changes. These costs are always affected by the amount of products being made. ...

Solution Summary

The attached worksheet shows how to calculate the total costs per unit, fixed costs per unit. It also shows how to flex the costs to any required level of output.

The solution also shows how to prepare the contribution format for a simple income statement.

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