Suppose that Adams Company sells a product for $19. Unit costs are as follows:
Direct materials $1.95
Direct labor 1.50
Variable factory overhead 2.05
Variable selling and administrative expense 0.96
Total fixed factory overhead is $51,658 per year, and total fixed selling and administrative expense is $38,630.
Required:
1. Calculate the variable cost per unit and the contribution margin per unit.
2. Calculate the contribution margin ratio and the variable cost ratio.
3. Calculate the break-even units.
4. Contribution margin income statement at the break-even number of units.