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The following information relates to Axar Products for calendar year 2011, the company's first year of operation:
Units produced.................$ 20,000Units sold...................$ 18,000Selling price per unit..............$ 30Direct material per unit.............$ 6Direct labor per unit.............. $ 4Variable manufacturing overhead per unit....... $ 2Variable selling cost per unit............. $ 3Annual fixed manufacturing overhead....... $160,000Annual fixed selling and administrative expense..... $ 80,000
Required:
a. Prepare an income statement using full costing.b. Prepare an income statement using variable costing.c. Using the variable costing income statement, calculate the company's break even point in sales dollars and in units. Can the break even point be calculated easily using the full costing income statement? Why or why not?
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