Zola Company manufactures and sells one product. The following information perta
ID: 2463999 • Letter: Z
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18
Fixed costs per year:
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $200,000
Fixed manufacturing overhead . . . . . . . . . . . . . . . . . . . $250,000
Fixed selling and administrative expenses . . . . . . . . . . $80,000
The company does not incur any variable manufacturing overhead costs or variable selling and
administrative expenses. During its first year of operations, Zola produced 25,000 units and sold
20,000 units. The selling price of the company’s product is $50 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.
Explanation / Answer
1. a. The unit product cost under super-variable costing would include direct materials of $18.
b. The super-variable costing income statement would be:
Sales (20,000 units × $50 per unit)..........
$1,000,000
Variable cost of goods sold
(20,000 units × $18 per unit).............
360,000
Contribution margin...............................
640,000
Fixed expenses:
Direct labor........................................
$200,000
Fixed manufacturing overhead.............
250,000
Fixed selling and administrative expense
80,000
530,000
Net operating income.............................
$ 110,000
Sales (20,000 units × $50 per unit)..........
$1,000,000
Variable cost of goods sold
(20,000 units × $18 per unit).............
360,000
Contribution margin...............................
640,000
Fixed expenses:
Direct labor........................................
$200,000
Fixed manufacturing overhead.............
250,000
Fixed selling and administrative expense
80,000
530,000
Net operating income.............................
$ 110,000
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