Task 3: Variable and Full Costing

The following information relates to Axar Products for the past year, the company's first year of operation:

Units produced	20,000
Units sold	18,000
Selling price per unit	$30
Direct material per unit	$6
Direct labor per unit	$4
Variable manufacturing overhead per unit	$2
Variable selling cost per unit	$3
Annual fixed manufacturing overhead	$160,000
Annual fixed selling and administrative expense	$80,000

a.Prepare an income statement using full costing.

b.Prepare an income statement using variable costing.

c.Using the variable costing income statement, calculate the companys break-even point in sales dollars and in units. Can the break-even point be calculated easily using the full costing income statement? Why or why not?