Question

Harris Company manufactures and sells a single product. A partially completed schedule of the company’s total costs and costs per unit over the relevant range of 51,000 to 91,000 units is given below:

Units Produced and Sold 51,000 71,000 91,000 Total costs: Variable costs $112,200 Fixed costs 380,000 Total costs $492,200 $0 $0 Cost per unit: Variable cost Fixed cost Total cost per unit $0.00 $0.00 $0.00

Required:

1. Complete the schedule of the company’s total costs and costs per unit as given in the relevant tab below.

2. Assume that the company produces and sells 81,000 units during the year at a selling price of $8.55 per unit. Prepare a contribution format income statement for the year.

Answer 1

• Requirement1

Units Produced and Sold
	51,000	71,000	91,000
Total costs:
Variable costs	$112,200	$156,200	$200,200
Fixed costs	$380,000	$380,000	$380,000
Total costs	$492,200	$536,200	$580,200
Cost per unit:
Variable cost	$2.20	$2.20	$2.20
Fixed cost	$7.45	$5.35	$4.18
Total cost per unit	$9.65	$7.55	$6.38

--Working

Units Produced and Sold
	51000	71000	91000
Total costs:
Variable costs	112200	=71000*2.2	=91000*2.2
Fixed costs	380000	380000	380000
Total costs	=112200+380000	=156200+380000	=200200+380000
Cost per unit:
Variable cost	=112200/51000	2.2	2.2
Fixed cost	=380000/51000	=380000/71000	=380000/91000
Total cost per unit	=2.2+7.45	=2.2+5.35	=2.2+4.18

• Contribution Income Statement

Sales	[81000 units x $ 8.55]	$692,550
Variable cost	[81000 units x $ 2.20]	$178,200
Contribution margin		$514,350
Fixed cost		$380,000
Net Income		$134,350