Tarbell Manufacturing Company has a maximum productive capacity of 210,000 units per year. Normal capacity is 180,000 units per year. Standard variable manufacturing costs are $10 per unit. Fixed factory overhead is $360,000 per year, Variable selling expense is $5 per unit and fixed selling expenses is $252,000 per year.

The unit sales price is $20.

The operating results for the year are as follows: sales, 150,000 units; production 160,000 units; beginning inventory, 10,000 units. All variances are written off as additions to (or deductions from) the standard cost of sales.


1. What is the break-even point expressed in dollar sales?

2. How many units must be sold to earn a net income of $100,000 per year?

3. Prepare a formal income statement for the year under the following:

a. Absorption costing (Hint: Don’t forget to compute the volume variance.)

b. Variable costing.