Chapter 6

Chuck Wagon Grills, Incorporated, makes a single producta handmade specialty barbecue grill that it sells for $210. Data for last years 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 last year.

3. What is the companys break-even point in terms of the number of barbecue grills sold?