The following information relates to Axar Products for calendar
The following information relates to Axar Products for calendar year 2011, the company’s first year of operation:
Units produced................. 20,000
Units sold................... 18,000
Selling price per unit.............. $ 30
Direct material per unit............. $ 6
Direct labor per unit.............. $ 4
Variable manufacturing overhead per unit....... $ 2
Variable selling cost per unit............. $ 3
Annual fixed manufacturing overhead....... $160,000
Annual fixed selling and administrative expense..... $ 80,000

Required
a. Prepare an income statement using full costing.
b. Prepare an income statement using variable costing.
c. Using the variable costing income statement, calculate the company’s break-even point in sales dollars and in units. Can the break-even point be calculated easily using the full costing income statement? Why or why not?

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