Yellowstone Company began operations on January 1 to produce a
Yellowstone Company began operations on January 1 to produce a single product. It used an absorption costing system with a planned production volume of 100,000 units. During its first year of operations, the planned production volume was achieved and there were no fixed selling or administrative expenses. Inventory on December 31 was 20,000 units, and net income for the year was $240,000.
1. If Yellowstone Company had used variable costing its net income would have been $220,000. Compute the break-even point in units under variable costing.
2. Draw a profit-volume graph for Yellowstone Company. (Use variable costing.)