Question

Zola Company manufactures and sells one product. The following information pertains to the company’s first year of operations:

14 Variable cost per unit: Direct materials Fixed costs per year: Direct labor Fixed manufacturing overhead Fixed selling and administrative expenses $ 171,000 $ 230,000 $ 70,000

The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Zola produced 19,000 units and sold 15,200 units. The selling price of the company’s product is $53.20 per unit.

Required:

1. Assume the company uses super-variable costing:

a. Compute the unit product cost for the year.

b. Prepare an income statement for the year.

Answer 1

1.a) Unit product cost 14 Working Notes: Under super-variable costing, only direct materials considered as an product cost and all other costs are period cost. So, Unit product cost is $ 14 because direct materials cost per unit is $ 14. $ 1.b) Zola Company Super-Variable Costing Income Statement Sales (15,200 Ⓡ$ 53.20) Variable cost of goods sold (15,200 x $ 14) Contribution Margin Fixed expenses: Direct labor 171,000 Fixed manufacturing overhead 230,000 Fixed selling and administrative expense 70,000 808,640 212,800 595,840 $ 471.000 Net Operating Income $ 124,840