Question

Harris Company manufactures and sells a single product.

1.

A partially completed schedule of the company’s total and per unit costs over the relevant range of 53,000 to 93,000 units produced and sold annually is given below: Complete the schedule of the company’s total and unit costs. (Round the variable cost and fixed cost to 2 decimal places.) Units Produced & Sold 53000 73000 93000 Total Costs Variable Costs $153700 ? ? Fixed Costs 370000 ? ? Total Costs $523700 ? ? Cost per Unit Variable Cost ? ? ? Fixed Cost ? ? ? Total Unit per Cost ? ? ? 2. Assume that the company produces and sells 83,000 units during the year at a selling price of $8.97 per unit. Prepare a contribution format income statement for the year. Harris Company Contribution Format Income Statement Sales ? Variable Expenses ? Contribution Margin ? Fixed Expense ? Net Operating Income ?

Answer 1

1)

First calculate the variable cost per unit:

Variable cost per unit = $153,700 / 53,000 units

= $2.9 per unit

	Units Produced & Sold
	53,000	73,000	93,000
Total Costs:
Variable Costs (73,000 units * $2.90 per unit); (93,000 units * $2.90 per unit) (a)	$153,700	$211,700	$269,700
Fixed Costs (b)	$370,000	$370,000	$370,000
Total Costs (a + b)	$523,700	$581,700	$639,700
Cost per unit:
Variable cost ($153,700 / 53,000 units) (c )	$2.90	$2.90	$2.90
Fixed Cost ($370,000 / 53,000 units); ($370,000 / 73,000 units); ($370,000 / 93,000 units) (d)	$6.98	$5.07	$3.98
Total Unit per Cost (c + d)	$9.88	$7.97	$6.88

* Fixed costs do not change when the number of units produced and sold are changed as fixed consts remaining constant and will incur.

** Fixed cost per unit will vary when goods produced and sold are vary.

*** Variable costs per unit remaining fixed but it varies in amounts.

2)

Harris Company
Contribution Format Income Statement
Sales Revenue (83,000 units * $8.97 per unit)	$744,510
Less: Variable Expenses (83,000 units * $2.90 per unit)	($240,700)
Contribution Margin	$503,810
Less: Fixed Expenses	($370,000)
Net Operating Income	$133,810