Reference no: EM13501896

Problem:

DATA

ABC, Inc. is a manufacturing business and has the following costs and expenses:

 

Sales price per unit		$90
Manufacturing costs:
		Direct materials
		Direct labor
		Variable Manufacturing overhead
		Fixed Manufacturing overhead
	Period expenses:
		Variable Selling and administrative expenses
		Fixed Selling and Administrative expenses
	Totals
Units produced		5,000	units
Units sold		5,800	units

 

Fixed Costs	Variable Costs
	$8
	11
	5
$200,000
	5
20,000
$220,000	$29

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

6. Calculate the breakeven point in units.

7. Calculate the breakeven point in sales dollars.

8. Calculate the safety margin.

9. What does the margin of safety mean?

10. Calculate the operating leverage .

11. What if sales volume increases by 6% 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.

12. What if the direct labor cost per unit increases from $11 a unit to $12, what will be the new breakeven in units? Explain why it changed.

You should only have to change the direct labor in the data area and actually all your answers should be updated. Please put the direct labor cost back to the original number once you have answered the question?