You are required show ALL supporting workings where necessary and state any assumption(s) made. _C-V-P Analysis Greek Manufacturing Company produces and sells a line of product that are sold usually all year round. The company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the year ended December 31, 2020. Selling price per unit……………………………………… $50.00 Production Costs: Direct Materials …………………………………. $10.00 Direct Labour ……………………………………. $8.00 Variable Manufacturing Overhead ……………. $7.00 Fixed Manufacturing Overhead…………....................... $450,000 Fixed Selling & Administrative Expenses……………… $300,000 Variable selling expense per unit ………………………. $10.00 Required: a. Using the equation method calculate the normal capacity of the business b.Assuming sales equal to the normal capacity calculated in (a) above, prepare a contribution margin income statement for the year ended December 31st, 2020, detailing the components of total variable costs and total fixed costs, and clearly showing contribution and net income
You are required show ALL supporting
workings where necessary and state any assumption(s) made.
_C-V-P Analysis
Greek Manufacturing Company produces and sells a line of product that are sold usually all year round. The
company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the
business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the
year ended December 31, 2020.
Selling price per unit……………………………………… $50.00
Production Costs:
Direct Materials …………………………………. $10.00
Direct Labour ……………………………………. $8.00
Variable Manufacturing
Fixed Manufacturing Overhead…………....................... $450,000
Fixed Selling & Administrative Expenses……………… $300,000
Variable selling expense per unit ………………………. $10.00
Required:
a. Using the equation method calculate the normal capacity of the business
b.Assuming sales equal to the normal capacity calculated in (a) above, prepare a contribution margin income statement for the year ended December 31st, 2020, detailing the components of total variable costs and total fixed costs, and clearly showing contribution and net income
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