We're using a different fictitious company for the last two modules, the managerial accounting portion of this course. Below find production and sales information for Lewis Company.
|Product information||Prod B|
|Selling price per unit||$300|
|Variable costs per unit|
|Variable selling and administrative||10|
|Fixed manufacturing overhead||250,000|
|Fixed selling and administrative||100,000|
|Absorption Income Statement|
|For the period ending Dec. 31, 2015|
|Cost of goods sold||2,205,000|
|Gross profit (margin)||$495,000|
|Selling and administrative expenses||190,000|
Prepare a contribution margin (behavioral, variable) income statement for Lewis Company, compare net operating profit from a contribution margin
income statement with net income from an absorption income statement, and explain why this difference happens. Prepare a second version assuming the selling price per unit increases to $320 per unit.
Further, answer break even questions below. Use the original information to:
Determine the number of units the company must sell to break even for the year?
Compute break even assuming direct materials cost increase from $120 to $150, but all information remains the same.