Reference no: EM133085210
Question - Inventory Costing and Capacity Analysis - Going into calendar year 2021 the Plant Company adopted a denominator level of production of 50,000 units (the normal volume). The Company gave you the following information for year 2021:
Sales price $20.00/ unit
Unit costs:
Direct material 4.00
Direct labor 3.00
Variable factory overhead 2.50
Fixed factory overhead 1.50 (based on normal production)
Variable selling expenses 2.50
In addition to the above costs, Plant had total fixed administrative expenses in 2021 of $200,000.
The Company actual produced 49,000 units and sold 48,000 units in 2021.
Required -
a. Prepare an income statement under the variable costing format.
b. Prepare an income statement under the absorption costing format.
c. Explain the difference in your calculation of income under requirements 1 and 2.
d. Determine Plant's breakeven level of sales (in units) under the variable costing format.
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