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    Behavioral, variable, income statement CVP for Lewis Company

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    We're using a different fictitious company for the last two modules, the managerial accounting portion of this course. Below find production and sales information for Lewis Company.
    Product information Prod B

    Beginning inventory 0
    Units produced 10,000
    Units sold 9,000

    Selling price per unit $300
    Variable costs per unit
    Direct material 120
    Direct labor 60
    Variable overhead 40
    Variable selling and administrative 10

    Fixed costs
    Fixed manufacturing overhead 250,000
    Fixed selling and administrative 100,000

    Lewis Company
    Absorption Income Statement
    For the period ending Dec. 31, 2012

    Sales $2,700,000
    Cost of goods sold 2,205,000
    Gross profit (margin) $495,000
    Selling and administrative expenses 180,000
    Net income $315,000

    Prepare a contribution margin (behavioral, variable) income statement for Lewis Company. Prepare a second version assuming the selling price per unit increases to $320 per unit.
    Use the original information to:
    ? Determine the number of units the company must sell to break even for the year?
    ? Compute break even assuming direct materials cost increase from $120 to $140, but all information remains the same.

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    Solution Preview

    Your tutorial is attached. This shows you the contribution margin format ...

    Solution Summary

    Your tutorial is attached. This shows you the contribution margin format under absorption costing and variable costing and reconciles the difference in profit between these two methods. Breakeven in units is computed and then done again with the $20 increase in variable cost per unit (materials).