Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it sells for $210. Data for last year’s operations follow: Units in beginning inventory 0 Units produced 20,000 Units sold 19,000 Units in ending inventory 1,000 Variable costs per unit: Direct materials $ 50 Direct labor 80 Variable manufacturing overhead 20 Variable selling and administrative 10 Total variable cost per unit $ 160 Fixed costs: Fixed manufacturing overhead $ 700,000 Fixed selling and administrative 285,000 Total fixed costs $ 985,000 Required: 1. Assume that the company uses variable costing. Compute the unit product cost for one barbecue grill. 2. Assume that the company uses variable costing. Prepare a contribution format income statement for last year.

Instructions are below.

Explanation:

Giving the following information:

Selling price= $210.

Units sold 19,000

Variable costs per unit:

Direct materials $50

Direct labor $80

Variable manufacturing overhead $20

Variable selling and administrative $10

Fixed costs:

Fixed manufacturing overhead $700,000

Fixed selling and administrative 285,000

Total fixed costs $ 985,000

Under the variable costing method, the unitary product cost is calculated using the direct material, direct labor, and variable overhead.

Unitary variable cost= 50 + 80 + 20= $150

Income statement:

Sales= 210*19,000= 3,990,000

Varaiable cost=  150*19,000= (2,850,000)

Contribution margin= 1,140,000

Variable administrative cost= 10*19,000= (190,000)

Fixed manufacturing overhead= (700,000)

Fixed selling and administrative= (285,000)

Net operating income= (35,000)

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