Waterloo Storage Products makes a four-drawer plastic storage cabinet on casters meant for use in garages and workshops. Each cabinet sells for $35. Data for last year’s operations follow:

Nits in beginning inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0

Units produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000

Units sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,500

Units in ending inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500

Variable costs per unit:

Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8

Direct labour. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Variable manufacturing overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Variable selling and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Total variable cost per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24

Fixed costs:

Fixed manufacturing overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,000

Fixed selling and administrative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000

Total fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$185,000

Required:

1. Assume that the company uses variable costing. Compute the unit product cost for one storage cabinet.

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

3. What is the company’s break-even point in terms of units sold?