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		9,900
Units sold		8,500
Units in ending inventory		1,400
Variable costs per unit:
Direct materials		$   60
Direct labor		20
Variable manufacturing overhead		10
Variable selling and administrative		30
Total variable cost per unit		$ 120
Fixed costs:
Fixed manufacturing overhead	$	150,000
Fixed selling and administrative		1,290,000
Total fixed costs	$	1,440,000

  

Required:

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

Unit product cost

2.	Assume that the company uses variable costing. Prepare a contribution format income statement for the year.
Chuck Wagon Grills, Inc.
Variable Costing Income Statement
Variable expenses:
Fixed expenses:

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

Break-even point

units

Answer 1