Presented below is information pertaining to the first and second quarters of 2001 operations of the Oak Company:

Additional information:
€¢ There were no finished goods at January 1, 2001.
€¢ Oak writes off any quarterly underapplied or overapplied overhead as an adjustment of Cost of Goods Sold.
€¢ Oak's income tax rate is 35 percent.
a. Prepare an absorption costing income statement for each quarter.
b. Prepare a variable costing income statement for each quarter.
c. Calculate each of the following for 2001, if 130,000 units were produced and sold:
1. Unit contribution margin
2. contribution margin ratio
3. Total contribution margin
4. Net income
5. Degree of operating leverage
6. Annual break-even unit sales volume
7. Annual break-even dollar sales volume
8. Annual margin of safety as a percentage

Transcribed Image Text:

QUARTER First Second Units Production Sales Expected activity level Unit selling price 35,000 30,000 32,500 $75.00 30,000 35,000 32,500 $75.00 Unit variable costs: Direct material Direct labor Factory overhead Operating expenses $34.50 16.50 7.80 5.70 S34.50 16.50 7.80 5.70 1 Quarterly fixed costs Factory overhead Operating expenses $97,500.00 21,400.00 $97,500.00 21,400.00