Aces Inc., a Manufacturer of Tennis Rackets

Aces Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,000 rackets and sold 4,900. Each racket was sold at a price of $90. Fixed overhead costs are $78,000, and fixed selling and administrative costs are $65,200. The company also reports the following per unit costs for the year:

Vijay reports the following information regarding its production costs

Vijay reports the following information regarding its production costs. Compute its production cost per unit under absorption costing.

Answer:

Per unit costs                   Absorption costing

Direct material                         $10

Direct labor                              $20

Variable overhead                    $10

Fixed overhead                        $8

Total product cost per units     $48

Compute its production cost per unit under variable costing.

Answer:

Per unit costs

Direct material                         $10

Direct labor                              $20

Variable overhead                    $10

Fixed overhead                           -

Total product cost per units     $40

US­-Mobile Manufactures and Sells Two Products

US­-Mobile manufactures and sells two products, tablet computers and smartphones, in the ratio of 5:3.Fixed costs are $105,000, and the contribution margin per composite unit is $125. What number of each type of product is sold at the break-even point?

Explanation:

Break­even point in composite units = $105,000/$125 = 840 composite units

Number of products sold at break­even = 8 × 840 = 6,720 units

Number of tablet computers sold at break­even: 840 × 5 = 4,200 tablets

Number of smartphones sold at break­even: 840 × 3 = 2,520 phones

The Sales Mix of a Company's Two Products

 

A Manufacturer Predicts Fixed Costs