Zola Company manufactures and sells one product. The following information perta

Question

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

The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Zola produced 22,000 units and sold 17,600 units. The selling price of the company’s product is $64.60 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.

Variable cost per unit: Direct materials $ 17 Fixed costs per year: Direct labor $ 264,000 Fixed manufacturing overhead $ 290,000 Fixed selling and administrative expenses $ 85,000

Explanation / Answer

a) Unit product Cost = 17 per unit

b) Income statement :

Sales (17600*64.60) 1136960 Less; Variable cost (17600*17) -299200 Contribution margin 837760 Less: Fixed cost Direct labour -264000 Fixed manufacturing overhead -290000 Fixed selling and administrative expenses -85000 Total Fixed cost -639000 Net operating income 198760

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