Question

Cost Behavior; Contribution Format Income Statement [LO2-4, LO2-6] Harris Company manufactures and sells a single product. A partially completed schedule of the company's total and per unit costs over the relevant range of 30,000 to 50,000 units produced and sold annually is given below: Units Produced and Sold 30,000 40,000 50,000 $180,000 300,000 $480.000 Total costs: Variable costs ..... Fixed costs ....... Total costs .......... Cost per unit: Variable cost .... Fixed cost ........ Total cost per unit .... | ww lol Required: 1. Complete the schedule of the company's total and unit costs above. 2. Assume that the company produces and sells 45,000 units during the year at a selling price of $16 per unit. Prepare a contribution format income statement for the year.

Answer 1

This question has two requirements answer of each requirment is given separately below.

Complete schedule of the company's total and unit costs

Variable cost per unit = (180,000/30,000) = $ 6 -A

Fixed rate per unit = (300,000/45,000 (assume)) = $ 6.67 -B

Total Fixed per unit = A+ B = $ 12.67

Total cost = 45,000 *12.67 = $ 570,000

Contribution format income statement for the year

Sales $ 720,000

Variable cost $ 270,000

Contribution margin $ 420,000

Fixed cost $ 300,000

Net operating income $ 120,000