Drake Company's

Units Sold
Sales
Less: Variable Expenses
Contribution Margin
Less: Fixed Expenses
Net Operating Income
a)
Unit Contribution Margin
b)
BEP in Dollars
c)
Desired Operating Income
Units to Be Sold

45,000
$1,350,000
$750,000
$600,000
$375,000
$225,000

$13.33

$843,834.38

$290,000
49,875

per Unit
$30
$16.67
$13.33

Percentage
100.00%
55.56%
44.44%

Dean Company
Selling Price
Units in Beginning Inventroy
Units Produced
Units Sold
VC per Unit:
DM
DL
VMOH
V Selling & Adm. Expenses
Fixed Costs:
FMOH
Fixed Selling & Admin. Expenses

$450
$0
25,000
22,000
$200
$50
$30
$15
$275,000
$230,000

a)
Cost per Unit Under Absorption Costing:
DM
$200
DL
$50
VOH
$30
Fixed OH
$11.00
Total Cost per Unit
$291
Cost per Unit Under Variable Costing:
DM
$200
DL
$50
VOH
$30
Total Cost per Unit
$280
b)
Dean Company
Income Statement - Absorption Costing
Sales
$9,900,000
Cost of Goods Sold:
Beginning Inventory
$0
Add: Cost of Goods Manufactured
$7,275,000
Cost of Goods Available for Sale
$7,275,000
Less: Ending Inventory
$873,000
$6,402,000
Gross Profit
$3,498,000
Selling & Administrative Expenses:
Variable S & A Expenses
$330,000
Fixed S & A Expenses
$230,000
$560,000

Net Operating Income

$2,938,000

c)
Dean Company
Income Statement - Variable Costing
Sales
Cost of Goods Sold:
Beginning Inventory
$0
Cost of Goods Manufactured
$7,000,000
Cost of Goods Available
$7,000,000
Less: Ending Inventory
$840,000
Variable Cost of Goods Sold
$6,160,000
Variable Selling & Administartive Expenses
$330,000
Contribution Margin
Less: Fixed Expenses:
Manufacturing Overhead
$275,000
Fixed Selling & Administrative Expenses
$230,000
Net Operating Income

$9,900,000

$6,490,000
$3,410,000

$505,000
$2,905,000