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    Variable and Absorption Costing

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    CompuDesk, Inc., makes an oak desk specially designed for personal computers. The desk sells for $195. Data for last year's operations follow:

    Units in beginning inventory 0
    Units produced 9,900
    Units sold 8,000
    Units in ending inventory 1,900
    Variable costs per unit:
    Direct materials $ 61
    Direct labor 32
    Variable manufacturing overhead 11
    Variable selling and administrative 22
    Total variable cost per unit $ 126
    Fixed costs
    Fixed manufacturing overhead $ 315,000
    Fixed selling and administrative 515,000
    Total fixed costs $ 830,000

    Requirement 1:
    Assume that the company uses variable costing. Compute the unit product cost for one computer desk.

    Unit product cost = $___________________

    Requirement 2:
    Assume that the company uses variable costing. Prepare a contribution format income statement for the year.
    (Fill in grey area)
    Sales $
    Variable expenses:
    Variable Cost of goods sold:
    Beginning inventory $
    Add: Variable manufacturing costs
    Goods available for sale
    Less: Ending inventory
    Variable cost of goods sold
    Variable selling and administrative
    Fixed expenses:
    Fixed manufacturing overhead
    Fixed selling and administrative
    Net operating loss $

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

    Break-even point = _________________ units.

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    Solution Summary

    The solution explains some calculations relating to variable and absorption costing