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Variable and Absorption Costing

Please see problem attached

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.


Solution Summary

The solution explains some calculations relating to variable and absorption costing