Reference no: EM132631881

Problem 1: Assume that we are manufacturing a product and assume that the sales price per unit is $60 and the variable cost is $20 per unit and the fixed cost is $80,000;

a) how many units would we need to sell to break even?

b) How many units would we need to sell to earn a profit of $120,000?

c) How many units do we need to sell to double that profit to $240,000?

D) Why didn't the number of units double from Part B to Part C?

Problem 2: Sivan Co. manufactures and sells one product. For the year, they started with no opening inventory; produced 100,000 units, but only sold 70,000 units. The selling price per each unit is $60.

The variable costs per unit were:

Direct materials.........................7
Direct Labor .............................6
Variable manufacturing overhead ....5
Variable selling and administrative...6
Fixed costs per year:
Fixed manufacturing Overhead ................$700,000
Fixed Selling and Administrative expenses.. $300,000

(a) Prepare the Income Statement using Absorption Costing.
(b) Prepare the Income Statement using Variable Costing