Accounting 403

| November 9, 2018

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, 2015

Sales

$2,700,000

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 $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.

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