Question

Waterloo Storage Products makes a four-drawer plastic storage cabinet on casters meant for use in garages and workshops. Each cabinet sells for $35. Data for last year’s operations follow:
Nits in beginning inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Units produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Units sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,500
Units in ending inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500
Variable costs per unit:
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8
Direct labour. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Variable manufacturing overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Variable selling and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Total variable cost per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24
Fixed costs:
Fixed manufacturing overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,000
Fixed selling and administrative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000
Total fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $185,000
Required:
1. Assume that the company uses variable costing. Compute the unit product cost for one storage cabinet.
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?


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  • CreatedJuly 08, 2015
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