Complete this question by entering your answers in the tabs below. Sims Company, a manufacturer of tablet computers, began operations on January 1, 2019. Its cost and sales information for this year follows. Manufacturing costs Direct materials $ 35 per unit Direct labor $ 55 per unit Overhead costs Variable $ 30 per unit Fixed $ 7,350,000 (per year) Selling and administrative costs for the year Variable $ 775,000 Fixed $ 4,500,000 Production and sales for the year Units produced 105,000 units Units sold 75,000 units Sales price per unit $ 360 per unit Required 1 Required 2 Prepare an income statement for the year using variable costing. SIMS COMPANY Variable Costing Income Statement
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Complete this question by entering your answers in the tabs below.
Sims Company, a manufacturer of tablet computers, began operations on January 1, 2019. Its cost and sales information for this year follows.
| Direct materials | $ | 35 | per unit |
| Direct labor | $ | 55 | per unit |
| Variable | $ | 30 | per unit |
| Fixed | $ | 7,350,000 | (per year) |
| Selling and administrative costs for the year | |||
| Variable | $ | 775,000 | |
| Fixed | $ | 4,500,000 | |
| Production and sales for the year | |||
| Units produced | 105,000 | units | |
| Units sold | 75,000 | units | |
| Sales price per unit | $ | 360 | per unit |
- Required 1
- Required 2
Prepare an income statement for the year using variable costing.
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