Camino, a leading firm in the sports industry, produces basketballs for the consumer market. For the year
Question:
Camino, a leading firm in the sports industry, produces basketballs for the consumer market. For the year ended December 31, 2017, Camino sold 400,000 basketballs at an average selling price of $12 per unit. The following information also relates to 2017 (assume constant unit costs and no variances of any kind):
Inventory, January 1, 2017: ……………………… 0 basketballs
Inventory, December 31, 2017: …………………. 20,000 basketballs
Fixed manufacturing costs: ……………………… $380,000
Fixed administrative costs: ……………………… $660,000
Direct materials costs: ………………………….. $ 3 per basketball
Direct labor costs: ………………………………. $ 4 per basketball
Required
1. Calculate the breakeven point (in basketballs sold) in 2017 under:
a. Variable costing
b. Absorption costing
2. Suppose direct materials costs were $4 per basketball instead. Assuming all other data are the same, calculate the minimum number of basketballs Camino must have sold in 2017 to attain a target operating income of $120,000 under:
a. Variable costing
b. Absorption costing
Step by Step Answer:
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 978-0134475585
16th edition
Authors: Srikant M. Datar, Madhav V. Rajan