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	$	13
Fixed costs per year:
Direct labor	$	144,000
Fixed manufacturing overhead	$	210,000
Fixed selling and administrative expenses	$	65,000

The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Zola produced 18,000 units and sold 14,400 units. The selling price of the company’s product is $49.40 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. Assume the company uses super-variable costing:

a. Compute the unit product cost for the year.

	Super variable costing
Direct material	13
Unit product cost	13

b. Prepare an income statement for the year.

Sales (14400*49.40)		711360
Less: Direct material (14400*13)		(187200)
Contribution margin		524160
Less : FIxed cost
Direct labour	(144000)
Fixed manufacturing overhead	(210000)
Fixed selling and administrative expenses	(65000)
Total fixed expenses		(419000)
Net operating income		105160