Homework SourseHaas Company manufactures and sells one product The followin
Haas Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations:
During its first year of operations, Haas produced 40,000 units and sold 40,000 units. During its second year of operations, it produced 55,000 units and sold 30,000 units. In its third year, Haas produced 20,000 units and sold 45,000 units. The selling price of the company’s product is $52 per unit.
Required:
1. Compute the company’s break-even point in unit sales.
2. Assume the company uses variable costing:
a. Compute the unit product cost for Year 1, Year 2, and Year 3 and Prepare an income statement for Year 1, Year 2, and Year 3.
3. Assume the company uses absorption costing:
a. Compute the unit product cost for Year 1, Year 2, and Year 3 (Round your intermediate calculations and final answers to 2 decimal places.) and Prepare an income statement for Year 1, Year 2, and Year 3.
| Variable costs per unit: | ||
| Manufacturing: | ||
| Direct materials | $ | 21 |
| Direct labor | $ | 13 |
| Variable manufacturing overhead | $ | 4 |
| Variable selling and administrative | $ | 2 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 330,000 |
| Fixed selling and administrative expenses | $ | 150,000 |
Solution
Solution 1:
Selling price per unit = $52
Variable cost per unit = Direct material + Direct labor + Variable manufacturing overhead + Variable Selling and administrative
= $21 + $13 + $4 + $2 = $40
Contribution per unit = Selling price per unit - Variable cost per unit = $52 - $40 = $12
Fixed cost for the year = $330,000 + 150,000 = $480,000
Break even point (In unit sales) = Fixed Cost / Contribution per unit = $480,000 / 12 = 40000 units
Solution 2:
As company is using variable costing, therefore unit product cost will be variable manufacturing cost per unit and will remain same for year 1, 2 & 3.
Variable manufacturing cost per unit = Direct material + Direct Labor + Variable manufacturing overhead
= $21 + $13 + $4 = $38 per unit.
Solution 3:
| Income Statement - Hass Company under Variable Costing | |||
| Particulars | Year 1 | Year 2 | Year 3 |
| Nos of Sold units | 40000 | 30000 | 45000 |
| Selling price per unit | $52.00 | $52.00 | $52.00 |
| Sales (Unit Sold * Selling Price) (A) | $2,080,000.00 | $1,560,000.00 | $2,340,000.00 |
| Variable Cost: | |||
| Direct Material | $840,000.00 | $630,000.00 | $945,000.00 |
| Direct Labor | $520,000.00 | $390,000.00 | $585,000.00 |
| Variable Manufacturing Overhead | $160,000.00 | $120,000.00 | $180,000.00 |
| Variable Selling and administrative expense | $80,000.00 | $60,000.00 | $90,000.00 |
| Total Variable Cost (B) | $1,600,000.00 | $1,200,000.00 | $1,800,000.00 |
| Contribution ( C )(A - B) | $480,000.00 | $360,000.00 | $540,000.00 |
| Fixed Cost: | |||
| Fixed Manufacturing Overhead | $330,000.00 | $330,000.00 | $330,000.00 |
| Fixed Selling and administrative expense | $150,000.00 | $150,000.00 | $150,000.00 |
| Total Fixed Cost (D) | $480,000.00 | $480,000.00 | $480,000.00 |
| Net Income (C-D) | $0.00 | -$120,000.00 | $60,000.00 |
