Variable Costing

Module 4 - SLP

MANAGERIAL ACCOUNTING - VARIABLE COSTING

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

Beginning inventory 0

Units produced 10,000

Units sold 9,000

Selling price per unit $300

Variable costs per unit

Direct material 120

Direct labor 60

Variable overhead 40

Variable selling and administrative 10

Fixed costs

Fixed manufacturing overhead 250,000

Fixed selling and administrative 100,000

Lewis Company

Absorption Income Statement

For the period ending Dec. 31, 2012

Sales $2,700,000

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Cost of goods sold 2,205,000

Gross profit (margin) $495,000

Selling and administrative expenses 190,000

Net income $305,000

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 $330 per unit.

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.

Assignment Expectations

It is important to answer the questions as posed. The document should be two to four pages and written in a clear and concise manner or present tables as required. Support your discussion or tables with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved. You can turn in the spreadsheet instead. The content should be equivalent to the page length suggested for a word processing document.