Answer and Explanation:
1. The preparation of the schedule of the company’s total and unit cost is shown below:-
<u>Particulars Units produced and sold</u>
69,000 89,000 109,000
Total cost
Variable cost $158,700 $204,700 $250,700
Fixed cost $360,000 $360,000 $360,000
Total cost $518,700 $564,700 $610,700
Cost per unit
Variable cost $2.30 $2.30 $2.30
Fixed costs $5.22 $4.04 $3.30
Total cost per unit $7.52 $6.34 $5.60
Working note
Variable cost per unit = Variable cost ÷ Units consumed
= 158,700 ÷ 69,000
= $2.3
Now, Variable cost for 89,000 units = $2.3 × 89,000
= $204,700
and Variable cost for 109,000 = $2.3 × 109,000
= $250,700
Fixed cost per unit for 69,000 = $360,000 ÷ 69,000
= $5.22
Now, Fixed cost for 89,000 units = $360,000 ÷ 89,000
= $4.04
and Fixed cost for 109,000 units = $360,000 ÷ 109,000
= $3.30
2.The preparation of contribution format income statement for the year is shown below:-
I<u>ncome statement </u>
<u>For the year ended</u>
<u>Particulars</u> <u>Amount</u>
Sales units 99,000
Selling price per unit $7.34
Sales amount $726,660
(99,000 × $7.34)
Less: Variable cost $227,700
(99,000 × $2.30)
Contribution $498,960
Less: Fixed cost $360,000
Net income $138,960
So, to reach net income we simply deduct the fixed cost from contribution.
