Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it sells for $200. Data for last year’s operations follow:
Units in beginning inventory 0
Units produced 10,200
Units sold 8,700
Units in ending inventory 1,500
Variable costs per unit:
Direct materials $ 80
Direct labor 40
Variable manufacturing overhead 10
Variable selling and administrative 30
Total variable cost per unit $ 160
Fixed costs:
Fixed manufacturing overhead $ 180,000
Fixed selling and administrative 180,000
Total fixed costs $ 360,000
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 the year.
3. What is the company’s break-even point in terms of the number of barbecue grills sold?