Reference no: EM131803940

Product information	Prod B
Beginning inventory	0
Units produced	10,000
Units sold	9,000
Selling price per unit	$300
Variable costs per unit
Direct material	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
For the period ending Dec. 31, 2015
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.