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. |
Prepare a contribution margin income statement at the break-even number of units. |