As you can see in table, Company X recorded $42,000,000 fixed manufacturing overhead costs in the year. Suppose, instead, that its fixed manufacturing overhead costs were $45,600,000 for the year, which is an increase of $3,600,000. Would the company’s operating profit have been $3,600,000 lower?
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Company X |
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Per Unit |
Totals |
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Operating Profit Report for Year |
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Sales volume, in Units |
110,000 |
|
|
Sales Revenue |
$1,400.00 |
$154,000,000 |
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Cost of Goods Sold Expense (see below) |
-760 |
-83,600,000 |
|
Gross Margin |
$640.00 |
$70,400,000 |
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Variable Operating Expenses |
-300 |
-33,000,000 |
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Contribution Margin |
$340.00 |
$37,400,000 |
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Fixed Operating Expenses |
-21,450,000 |
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|
Operating Profit |
$15,950,000 |
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Manufacturing Activity Summary for Year |
Per Unit |
Totals |
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Annual Production Capacity, in Units |
150,000 |
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Actual Output, in Units |
120,000 |
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Raw Materials |
$215.00 |
$25,800,000 |
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Direct Labor |
125 |
15,000,000 |
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Variable Manufacturing Overhead Costs |
70 |
8,400,000 |
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Total Variable Manufacturing Costs |
$410.00 |
$49,200,000 |
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Fixed Manufacturing Overhead Costs |
350 |
42,000,000 |
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Product Cost and Total Manufacturing Costs |
$760.00 |
$91,200,000 |