Question

PROBLEM 6-18 Variable and Absorption Costing Unit Product Costs and Income Statements [L06-1, L06-2] Haas Company manufactures and sells one product. The following information pertains to each of the company's first three years of operations: $20 $12 Variable costs per unit: Manufacturing: Direct materials. Direct labor Variable manufacturing overhead ....... Variable selling and administrative ........... Fixed costs per year: Fixed manufacturing overhead ............ Fixed selling and administrative expenses .......... $4 $960,000 $240,000 During its first year of operations, Haas produced 60,000 units and sold 60,000 units. During its sec- ond year of operations, it produced 75,000 units and sold 50,000 units. In its third year, Haas produced units. The selling price of the company's product is $58 per unit. Required: 1. Compute the company's break-even point in units sold. 2. Assume the company uses variable costing: a. Compute the unit product cost for Year 1 Year 2, and Year 3. b. Prepare an income statement for Year 1, Year 2, and Year 3. 3. Assume the company uses absorption costing a. Compute the unit product cost for Year 1, Year 2, and Year 3. b. Prepare an income statement for Year 1, Year 2, and Year 3. 4. Compare the net operating income figures that you computed in requirements 2 and 3 to the break-even point that you computed in requirement 1. Which net operating income figures seem counterintuitive? Why?