2-4 Pages
Deadline 18 August.

Below find production and sales information for Lewis Company.
Product information

Prod B

Beginning inventory

0

Units produced

10,000

Units sold

9,000

Selling price per unit

$300

Variable costs per unit
Direct material

120

Direct labor

60

Variable overhead

40

Variable selling and administrative

10

Fixed costs
Fixed manufacturing overhead

250,000

Fixed selling and administrative

100,000

Lewis Company
Absorption Income Statement
For the period ending Dec. 31, 2015

Sales

$2,700,000

Cost of goods sold

2,205,000

Gross profit (margin)

$495,000

Selling and administrative expenses

190,000

Net income

$305,000

Prepare a contribution margin (behavioral, variable) income statement for Lewis Company, compare net
operating profit from a contribution margin income statement with net income from an absorption
income statement, and explain why this difference happens.
Prepare a second version assuming the selling price per unit increases to $320 per unit.
Further, answer break even questions below. Use the original information to:

Determine the number of units the company must sell to break even for the year?

Compute break even assuming direct materials cost increase from $120 to $150, but all
information remains the same.