Question

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

Variable cost per unit:
Direct materials	$	14
Fixed costs per year:
Direct labor	$	157,250
Fixed manufacturing overhead	$	220,000
Fixed selling and administrative expenses	$	67,500

The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Zola produced 18,500 units and sold 14,800 units. The selling price of the company’s product is $51.30 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

a)
Unit product cost
Direct material	$            14.00
Direct Labor	$               8.50
Product cost per unit	$            22.50
b)
Income statement
Sales-14800*51.30	$        759,240
Less: Variable cost-14800*22.5	$        333,000
Contribution (Sales-Variable cost)	$        426,240
Less: Fixed cost
Fixed manufacturing overhead	$        220,000
Fixed selling and administrative expenses	$          67,500
Net income	$        138,740