Question

Harris Company manufactures and sells a single product. A partially completed schedule of the company’s total costs and costs per unit over the relevant range of 30,000 to 50,000 units is given below:

Required:

1. Complete the above schedule of the company’s total costs and costs per unit.

2. Assume that the company produces and sells 45,000 units during the year at a selling price of $16 per unit. Prepare a contribution format income statement for the year

Answer 1

1. The company’s variable cost per unit is:

$180,000/30,000 units =$6 per unit.  The completed schedule is as follows:

2. The company’s contribution format income statement is:

Sales (45,000 units × $16 per unit)........................ $720,000

Variable expenses (45,000 units × $6 per unit)....... 270,000

Contribution margin .............................................. 450,000

Fixed expense....................................................... 300,000

Net operating income ............................................ $150,000