Question

# Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it sells for...

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 9,700 Units sold 9,000 Units in ending inventory 700 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 \$ 180,000 Fixed selling and administrative 1,260,000 Total fixed costs \$ 1,440,000

Required:

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

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

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

>All working forms part of the answer

>Requirement 1

 Direct materials \$60 Direct labor \$20 Variable manufacturing overhead \$10 Unit Product Cost for one barbecue grill \$90 = Answer

>Requirement 2: Contribution margin Income Statement

 Sales \$2,700,000 Less: Variable Expenses Direct Material \$540,000 Direct Labor \$180,000 Variable manufacturing overhead \$90,000 Variable selling & administrative \$270,000 \$1,080,000 Contribution margin \$1,620,000 Less: Fixed cost Fixed manufacturing overhead \$180,000 Fixed selling & admins trative cost \$1,260,000 \$1,440,000 Net Operating Income \$180,000

>Requirement 3

 A Sale price per unit \$300 Direct materials \$60 Direct labor \$20 Variable manufacturing overhead \$10 Variable selling & admin \$30 B Total Variable cost per unit \$120 C = A - B Contribution margin per unit \$180 D Total Fixed Cost \$1,440,000 E = D/C Break even point in terms of no. of grills 8,000 = ANSWER

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