Question

Harris Company manufactures and sells a single product. A partially completed schedule of company's total and per unit costs over relevant range of $30,000- 50,000 units produced and sold eventually is given:

Units Produced/Sold=30,000
Total Costs
Variable Costs.....$180,000
Fixed Costs........300,000
Total Costs..........$480,000

Cost per unit:
Variable Cost.....?
Fixed Cost.......?
Total Cost per unit....?

Units Produced/Sold=40,000
Total Costs
Variable Costs.....?
Fixed Costs........?
Total Costs.........?

Cost per unit:
Variable Cost.....?
Fixed Cost.......?
Total Cost per unit....?

Units Produced/Sold=50,000
Total Costs
Variable Costs.....?
Fixed Costs........?
Total Costs..........?

Cost per unit:
Variable Cost.....?
Fixed Cost.......?
Total Cost per unit....?

Required:
1. Complete schedule of company's total and unit costs above.
2. Assume company produces and sells 45,000 units during the year at a selling price of $16 per unit. Prepare contribution formal income statement for the year.

Answer 1

1) Follow explanation

2)Revenues= $720000

COGS= 45000*6=$270000 (-)

Gross profit= $450000

Fixed costs= $300000 (-)

Net profit=$150000

Step-by-step explanation:

Harris Company manufactures and sells a single product.

With the following information we need to complete the schedule and make an income statement:

Relevant range of $30,000- 50,000 units produced and sold eventually is given:

Units Produced/Sold=30,000

Total Costs

Variable Costs.....$180,000

Fixed Costs........300,000

Total Costs..........$480,000

Cost per unit:

Variable Cost=Total VC/units= $6

Fixed Cost= Total FC/Units= $10

Total Cost per unit= $16

Units Produced/Sold=40,000

Total Costs

Variable Costs= 40000*6= $240000

Fixed Costs= $300000

Total Costs= $540000

Cost per unit:

Variable Cost= $6

Fixed Cost= $7,5

Total Cost per unit= $13,5

Units Produced/Sold=50,000

Total Costs

Variable Costs=500000*6= $300000

Fixed Costs= $300000

Total Costs= $600000

Cost per unit:

Variable Cost= $6

Fixed Cost= 300000/50000=$6

Total Cost per unit= $12

2)

The general structure of an income statement proceeds as follow:

Revenue/Sales (+)

Cost of Goods Sold (COGS) (-)

=Gross Profit

Marketing, Advertising, and Promotion Expenses (-)

General and Administrative (G&A) Expenses (-)

=EBITDA

Depreciation & Amortization Expense (-)

=Operating Income or EBIT

Interest (-)

Other Expenses (-)

=EBT (Pre-Tax Income)

Income Taxes (-)

=Net Income

In this exercise:

Units sold= 45000 Price=$16

Revenues= $720000

COGS= 45000*6=$270000 (-)

Gross profit= $450000

Fixed costs= $300000 (-)

Net profit=$150000