Chapter 9, Problem 9.31E

Variable and absorption costing and breakeven points. Camino, a leading firm in the sports industry, produces basketballs for the consumer market. For the year ended December 31, 2017, Camino sold 400,0 basketballs at an average selling price of $12 per unit. The following information also relates to 2017 (assume constant unit costs and no variances of any kind):

Inventory, January 1, 2017: 0 basketballs

Inventory, December 31, 2017: 20,000 basketballs

Fixed manufacturing costs: $380,000

Fixed administrative costs: $660,000

Direct materials costs: $ 3 per basketball

Direct labor costs: $ 4 per basketball

1. 1. Prepare income statements under (a) variable, (b) absorption, and (c) throughput costing for the year ended December 31, 2017.
2. 2. Calculate the breakeven point (in basketballs sold) in 2017 under:
   1. a. Variable costing
   2. b. Absorption costing
   3. c. Throughput costing
3. 3. Suppose direct materials costs were $4 per basketball instead. Assuming all other data are the same, calculate the minimum number of basketballs Camino must have sold in 2017 to attain a target operating income of $120,000 under:
   1. a. Variable costing
   2. b. Absorption costing
   3. c. Throughput costing