(CVP, DOL, MS—two quarters, comprehensive) Presented below is information
pertaining to the first and second quarters of 2001 operations of the Oak Company:
|
QUARTER |
||
|
Units: |
First |
Second |
|
Production |
35,000 |
30,000 |
|
Sales |
30,000 |
35,000 |
|
Expected activity level |
32,500 |
32,500 |
|
Unit selling price |
$75.00 |
$75.00 |
|
Unit variable costs: |
$34.50 |
Second |
|
Direct material |
16.50 |
$34.50 |
|
Direct labor |
7.80 |
16.50 |
|
Factory overhead |
5.70 |
7.80 |
|
Operating expenses |
5.70 |
|
|
Quarterly fixed costs: |
||
|
Factory overhead |
97,500.00 |
97,500.00 |
|
Operating expenses |
21,400.00 |
21,400.00 |
Additional information:
• There were no finished goods at January 1, 2001.
• Oak writes off any quarterly underapplied or overapplied overhead as an adjustment of Cost of Goods Sold.
• Oak’s income tax rate is 35 percent.
a. Prepare an absorption costing income statement for each quarter.
b. Prepare a variable costing income statement for each quarter.
c. Calculate each of the following for 2001, if 130,000 units were produced and sold:
1. Unit contribution margin
2. Contribution margin ratio
3. Total contribution margin
4. Net income
5. Degree of operating leverage
6. Annual break even unit sales volume
7. Annual break even dollar sales volume
8. Annual margin of safety as a percentage