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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

Required:
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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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).

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