Whistler, Inc., manufactures a specialized snowboard made for the advanced snowboarder. Whistler began 2014 with an inventory of 240 snowboards. During the year, it produced 900 boards and sold 995 for $ 750 each. Fixed production costs were $ 280,000, and variable production costs were $ 325 per unit. Fixed advertising, marketing, and other general and administrative expenses were $ 112,000, and variable shipping costs were $ 15 per board. Assume that the cost of each unit in beginning inventory is equal to 2014 inventory cost.

1. Prepare an income statement assuming Whistler uses variable costing.
2. Prepare an income statement assuming Whistler uses absorption costing. Whistler uses a denominator level of 1,000 units. Production-volume variances are written off to cost of goods sold.
3. Compute the breakeven point in units sold assuming Whistler uses the following:
a. Variable costing
b. Absorption costing (Production = 900 boards)
4. Provide proof of your preceding breakeven calculations.
5. Assume that $ 20,000 of fixed administrative costs were reclassified as fixed production costs. Would this reclassification affect breakeven point using variable costing? What if absorption costing were used? Explain.
6. The company that supplies Whistler with its specialized impact-resistant material has announced a price increase of $ 30 for each board. What effect would this have on the breakeven points previously calculated?

  • CreatedMay 14, 2014
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