Question

Harris Company manufactures and sells a single product.

Required:

1.

A partially completed schedule of the company’s total and per unit costs over the relevant range of 64,000 to 104,000 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 and sold 64,000 84,000 104,000 Total Costs: variable costs $147,200 fixed costs 460,000 total costs 607,200 Cost per unit: variable cost fixed cost total cost per unit

      

2.	Assume that the company produces and sells 94,000 units during the year at a selling price of $8.78 per unit. Prepare a contribution format income statement for the year.
	Harris Company Contibution Format Income Statement

      

Answer 1

1.

	Units produced and sold
	$                                64,000	$                                   84,000	$                                   104,000
Total costs
Variable costs	$                             147,200	84,000*$2.30 = $193,200	104,000*$2.30 = $239,200
Fixed costs	$                             460,000	$                                 460,000	$                                   460,000
Total costs	$                             607,200	$                                 653,200	$                                   699,200
Cost per unit
Variable cost	$147,200/64,000 = $2.30	$                                        2.30	$                                          2.30
Fixed cost	$460,000/64,000 = $7.19	$460,000/84,000 = $5.48	$460,000/104,000 = $4.42
Total cost per unit	$2.30+$7.19 = $9.49	$2.30+$5.48 = $7.78	$2.30+$4.42 = $6.72

2.

Harris Company
Contribution format income statement
Sales ($8.78*94,000)	$ 825,320
Less: Variable cost ($2.30*94,000)	$ 216,200
Gross profit	$ 609,120
Less: Fixed cost	$ 460,000
Net income	$ 149,120