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Product information
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Prod B
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Beginning inventory
|
0
|
|
Units produced
|
10,000
|
|
Units sold
|
9,000
|
|
|
|
|
Selling price per unit
|
$300
|
|
Variable costs per unit
|
|
|
Direct material
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120
|
|
Direct labor
|
60
|
|
Variable overhead
|
40
|
|
Variable selling and administrative
|
10
|
|
|
|
|
Fixed costs
|
|
|
Fixed manufacturing overhead
|
250,000
|
|
Fixed selling and administrative
|
100,000
|
|
Lewis Company
|
|
Absorption Income Statement
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|
For the period ending Dec. 31, 2015
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|
Sales
|
$2,700,000
|
|
Cost of goods sold
|
2,205,000
|
|
Gross profit (margin)
|
$495,000
|
|
Selling and administrative expenses
|
190,000
|
|
Net income
|
$305,000
|
Prepare a contribution margin (behavioral, variable) income statement for Lewis Company, compare net operating profit from a contribution margin income statement with net income from an absorption income statement, and explain why this difference happens. Prepare a second version assuming the selling price per unit increases to $320 per unit.
Further, answer break even questions below. Use the original information to:
- Determine the number of units the company must sell to break even for the year?
- Compute break even assuming direct materials cost increase from $120 to $150, but all information remains the same.