EXERCISE 5A–6 Variable Costing Unit Product Cost and Income Statement; Break-Even [ LO5 , LO6 ]

Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it sells for

$210. Data for last year’s operations follow:

Units in beginning inventory ................................ 0 Units produced .................................................... 20,000 Units sold ............................................................. 19,000 Units in ending inventory ..................................... 1,000 Variable costs per unit:

Direct materials ................................................ $ 50 Direct labor ....................................................... 80 Variable manufacturing overhead .................... 20 Variable selling and administrative .................. 10 Total variable cost per unit ............................... $160 Fixed costs:

Fixed manufacturing overhead ........................ $700,000 Fixed selling and administrative ....................... 285,000 Total fixed costs ............................................... $985,000 Required:

1. Assume that the company uses variable costing. Compute the unit product cost for one barbecue grill.

2. Assume that the company uses variable costing. Prepare a contribution format income statement for the year.