41. Account Analysis and Contribution Margin Income Statement. Downhill Company would like to estimate costs associated with its production of bike helmets on a monthly basis. The accounting records indicate the following production costs were incurred last month for 4,000 helmets: Assembly workers’ labor (hourly)$70,000Factory rent3,000Plant manager’s salary5,000Supplies20,000Factory insurance12,000Materials required for production20,000Maintenance of production equipment (based on usage)18,000Required: 1. Use account analysis to estimate the total fixed cost per month and the variable cost per unit. State your results in the cost equation form Y = f + vX by filling in the dollar amounts for f and v. 2. Estimate total production costs assuming 5,000 helmets will be produced and sold. 3. Prepare a contribution margin income statement assuming 5,000 helmets will be produced, and each helmet will be sold for $70. Fixed selling and administrative costs total $10,000. Variable selling and administrative costs are $8 per unit.

Account analysis is the practise of carefully reviewing each line item in a financial transaction or…

Answered: Account Analysis and Contribution…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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41. Account Analysis and Contribution Margin Income Statement. Downhill Company would like to estimate costs associated with its production of bike helmets on a monthly basis. The accounting records indicate the following production costs were incurred last month for 4,000 helmets:
Assembly workers’ labor (hourly)	$70,000
Factory rent	3,000
Plant manager’s salary	5,000
Supplies	20,000
Factory insurance	12,000
Materials required for production	20,000
Maintenance of production equipment (based on usage)	18,000
Required:

1. Use account analysis to estimate the total fixed cost per month and the variable cost per unit. State your results in the cost equation form Y = f + vX by filling in the dollar amounts for f and v.
2. Estimate total production costs assuming 5,000 helmets will be produced and sold.
3. Prepare a contribution margin income statement assuming 5,000 helmets will be produced, and each helmet will be sold for $70. Fixed selling and administrative costs total $10,000. Variable selling and administrative costs are $8 per unit.