Question:
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 400,000 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):


Answer:
Step 1
Requirement 1:
a.
Compute the break-even point (in basketballs sold) in 2017 under Variable costing:
Step 2
b.
Compute the break-even point (in basketballs sold) in 2017 under Absorption costing:
Step 3
Working Notes:
Prepare income statement of Camino under variable costing and Absorption costing.