CompuDesk, Inc., makes an oak desk specially designed for personal computers. The desk sells for $200. Data for last year’s operations follow:
Units in beginning inventory . . . . . . . . . . . . . . . . . . 0
Units produced. . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Units sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000
Units in ending inventory . . . . . . . . . . . . . . . . . . 1,000
Variable costs per unit:
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . $ 60
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Variable manufacturing overhead . . . . . . . . . . . . 10
Variable selling and administrative . . . . . . . . . . . 20
Total variable cost per unit . . . . . . . . . . . . . . . . $ 120
Fixed costs003A
Fixed manufacturing overhead . . . . . . . . . . . $300,000
Fixed selling and administrative . . . . . . . . . . 450,000
Total fixed costs . . . . . . . . . . . . . . . . . . . . . . $750,000
Required:
1. Assume that the company uses variable costing. Compute the unit product cost for one computer desk.
2. Assume that the company uses variable costing. Prepare a contribution format income statement for the year.
3. What is the company’s break even point in terms of units sold?