Michie Company's management accountant prepared the following income statement relating to its second year of operations using the absorption costing format:

\begin{array}{c}\hline \text {Michie Company } \\\hline \text {Income Statement (Absorption Costing)} \\\hline \text {Year Ended December 31, 2014} \\\begin{array}{|l|c|r|r|}\hline \text {Sales } & (50,000 \times \$ 20.00) & & \$ 100,000 \\\hline \text { Cost of goods sold } & & & \\\hline\text { Beginning inventory } & \left(10,000 \times \$ 10.00^{*}\right) & \$ 100,000 \\\hline \text { Variable and fixed manufacturing costs } & \left(45,000 \times \$ 10.00^{*}\right) & 450,000 \\\hline \text { Cost of goods available for sale } & (55,000 \times \$ 10.00) & 550,000 \\\hline \text { Less ending irventory } & (5,000 \times \$ 10.00) & 50,000 & \underline { 500,000} \\\hline \text { Gross margin at standard } & &&\$ 500,000\\\hline \text { Adjustment for volume variance } & (5,000 \times \$ 2.00^{*}) & &\underline { 10,000} \\\hline \text {Gross margin at actual } & & &\$ 490,000\\\hline \text {Less operating costs:} & &&\\\hline \text {Variable selling and administrative costs} & (50,000 \times \$ 2.00) &\$ \quad 100,000&\\\hline \text {Fixed selling and administrative costs } && \underline { 150,000 }& \underline { 250,000} \\\hline \text { Net income } & && \underline { \$ 240,000} \\\hline\end{array}\end{array}

Breakeven point under absorption costing 20,000 units.
* Variable manufacturing costs of $8.00 plus fixed manufacturing costs of $2.00.
** The $2.00 fixed manufacturing cost per unit is based on budgeted production of 50,000 units.
Since actual production was only 45,000,an unfavorable volume variance of $10,000 occurred.
The company uses a standard costing system.The only variance that occurred during the period was the $10,000 unfavorable volume variance.
Required:
1)Prepare an income statement for Michie Company under variable costing.
2)Compute the breakeven point in units (total fixed costs ÷ unit contribution margin)under variable costing.
CHANGE NEEDS TO BE MADE TO TABLE
Change the "2014" to:
Year 2

Which of the Following Correctly Computes Cost of Goods Manufactured

Multiple Choice

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