Question

Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it sells for $300. Data for last year’s operations follow:

  

Units in beginning inventory		0
Units produced		10,300
Units sold		8,000
Units in ending inventory		2,300
Variable costs per unit:
Direct materials	$	80
Direct labor		20
Variable manufacturing overhead		10
Variable selling and administrative		30
Total variable cost per unit	$	140
Fixed costs:
Fixed manufacturing overhead	$	180,000
Fixed selling and administrative		620,000
Total fixed costs	$	800,000

Assume that the company uses variable costing. Compute the unit product cost for one barbecue grill.

Unit product cost

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

Chuck Wagon Grills, Inc.
Variable Costing Income Statement

What is the company’s break-even point in terms of the number of barbecue grills sold?

Break-even point

units

Answer 1