Appropriate assumptions about cost behavior

Reference no: EM13259600

Bart's Woodwork Company makes and sells wooden shelves.Bart's carpenters make the shelves in the company'srented building. Bart has a separate office at another locationthat also includes a showroom where customers can view sampleshelves and ask questions of sales people. The company sells allthe shelves it produces each year. Assume the company keeps noinventories. The following information pertains to Bart'sWoodwork Company for the past year.

Units produced andsold $50,000
Sales price perunit $70
Carpenter labor to makeshelves 600,000
Wood to make theshelves 450,000
Sales staffsalaries 80,000
Office and showroom rentalexpenses 150,000
Depreciation on carpentryequipment 50,000
Advertising 200,000
Sales commissions based on number of unitssold 180,000
Miscellaneous fixed manufacturing overhead(support) 150,000
Rent for the building where the shelves aremade 300,000
Miscellaneous variable manufacturing overhead(support) 350,000
Depreciation for officeequipment 10,000

Required:

Based on this information, prepare a financial income statement(that is, in the form required under GAAP for U.S. externalreporting).
For this information, make appropriate assumptions about cost behavior and assume that direct labor costs vary directly with thenumber of units produced. How many units must the company sell inorder to earn a pretax profit of $500,000?

Reference no: EM13259600

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