Problem:
DATA
ABC, Inc. is a newly organized manufacturing business this year.
The following company's costs and expenses are:
Sales price per unit $75
Manufacturing costs: Fixed Costs Variable Costs
Direct materials $8
Direct labor 10
Variable Manufacturing overhead 5
Fixed Manufacturing overhead $110,200
Period expenses:
Variable Selling and administrative expenses 6
Fixed Selling and Administrative expenses 10,000
Totals $120,200 $29
Units produced 5,800 units
Units sold 5,600 units
Required: Use the information in the DATA field above using cell referencing to answer the following requirements.
1. Calculate the unit cost for variable costing.
2. Calculate the unit cost for absorption costing.
3. Prepare an absorption-costing income statement.
4. Prepare a variable-costing income statement.
5. Reconcile the differences in income that you calculated in #3 and #4
6. Calculate the breakeven point in units.
7. Calculate the breakeven point in sales dollars.
8. Calculate the safety margin and explain what the margin of safety means for this ABC Inc.
9. Calculate the operating leverage.
10. What if sales volume increases by 4% how much will income increase in percentage terms? Make sure you have read over the DOL discussion and understand the multiplier impact of changes in sales volume that occurs based on DOL.
11. What if the direct material cost per unit decreases from $8 a unit to $7, what will be the new breakeven in units? Explain why it changed.
You should only have to change the direct material cost in the data area and actually all your answers should be updated. Please put the direct material cost back to the original number once you have answered the question.
12. What if the manufacturing overhead cost decreases from 110,200 to 116,000, what will be the new breakeven in units? Explain why it changed.
You should only have to change the fixed MOH in the data area and actually all your answers should be updated. Please put the fixed MOH cost back to the original number once you have answered the question.