Concept explainers
Super-Variable Costing Income Statement LO4—6
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
Required:
- Assume the company uses super-variable costing:
- Compute the unit product cost for the year.
- Prepare an income statement for the year.
Concept introduction:
Income statement:
The income statement tells about the revenues earned and expenses incurred by the company in a specific period of time. It is also known as operations statement, earnings statement, revenue statement or profit, and loss statement.
- Calculate the unit product cost.
- Prepare an income statement for the given year.
Answer to Problem 4A.1E
- The unit product cost is $18.
- The income statement of Company Z is as follows:
Company Z | |||
Income Statement | |||
Particulars | Amount (Unit)(a) | Units(b) | Total amount(c = a × b) |
Sales | $50 | 20000 | $1,000,000 |
Less: Variable cost | ($18) | 20000 | ($360,000) |
Contribution margin (a) | $640,000 | ||
Less: Fixed costs | |||
Direct labor | $200,000 | ||
Fixed manufacturing cost | $250,000 | ||
Fixed selling and administration expenses | $80,000 | ||
Total fixed costs (b) | $530,000 | ||
Net operating income (c = a -b) | $110,000 |
Table: (1)
Explanation of Solution
(a)
Calculate the unit product cost:
The company uses the variable costing method. Under the variable costing method, the variable cost is considered as the product cost. In the given case, the variable cost of the product is $18.
Thus, the unit product cost is $18.
(b)
Prepare an income statement for the given year:
Company Z | |||
Income Statement | |||
Particulars | Amount (Unit)(a) | Units(b) | Total amount(c = a × b) |
Sales | $50 | 20000 | $1,000,000 |
Less: Variable cost | ($18) | 20000 | ($360,000) |
Contribution margin (a) | $640,000 | ||
Less: Fixed costs | |||
Direct labor | $200,000 | ||
Fixed manufacturing cost | $250,000 | ||
Fixed selling and administration expenses | $80,000 | ||
Total fixed costs (b) | $530,000 | ||
Net operating income (c = a -b) | $110,000 |
Table: (2)
Want to see more full solutions like this?
- A company sells small motors as a component part to automobiles. The Model 101 motor sells for $850 and has per-unit variable costs of $400 associated with its production. The company has fixed expenses of $90,000 per month. In August, the company sold 425 of the Model 101 motors. A. Calculate the contribution margin per unit for the Model 101. B. Calculate the contribution margin ratio of the Model 101. C. Prepare a contribution margin income statement for the month of August.arrow_forwardQ. No. 2: Martinez Company's relevant range of production is 15,000 units to 25,000 units. When it produces and sells 17,500 units, its average costs per unit are as follows: Average Cost per Unit ($) Selling Price Direct materials Direct labor. Variable manufacturing overhead Fixed manufacturing overhead. Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense 50 10 6. 5. 3 2 2.5 Required: a. For financial accounting purposes, what is the total amount of product costs incurred to make 17,500 units? b. If 18,500 units are produced and sold, calculate the variable cost per unit and total for units produced and sold? c. If 19,000 units are produced, what is the average fixed manufacturing cost per unit produced? d. if 19,500 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production? What is this total amount expressed on a per unit basis?arrow_forwardm.4arrow_forward
- Required information [The following information applies to the questions displayed below.] Barnes Company reports the following for its product for its first year of operations. $30 per unit $20 per unit $ 11 per unit 60,000 per year $3 per unit $ 22,000 per year $ Direct materials Direct labor Variable overhead Fixed overhead Variable selling and administrative expenses Fixed selling and administrative expenses The company sells its product for $150 per unit. Compute contribution margin using variable costing assuming the company (a) produces and sells 2,400 units and (b) produces 3,000 units and sells 2,400 units. X Answer is complete but not entirely correct. Contribution margin using variable costing Sales Variable expenses Direct materials Direct labor Variable overhead Contribution margin (a) 2,400 Units Produced and 2,400 Units Sold ✔ $ X X X 360,000 $ 72,000 48,000 X 26,400 X 213,600 $ (b) 3,000 Units Produced and 2,400 Units Sold 360,000✔ 90,000 X 60,000 X 33,000 X 147,000arrow_forwardRequired [The following information applies to the questions displayed below.] Diego Company manufactures one product that is sold for $78 per unit. The following information pertains to the company's first year of operations in which it produced 60,000 units and sold 55,000 units. Variable costs per unit: Manufacturing: Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses 3. What is the company's total contribution margin under variable costing? Total Contribution margin LA LA LA LA 8223 12 $1,260,000 $ 654,000arrow_forwardPlease Do not Give image formatarrow_forward
- Please provide correct solutionarrow_forward[The following information applies to the questions displayed below.] Diego Company manufactures one product that is sold for $78 per unit. The following information pertains to the company's first year of operations in which it produced 60,000 units and sold 55,000 units. Variable costs per unit: Manufacturing: Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses $ Net operating income Net operating loss LALALALA $ $ $ 6. What is the company's net operating income (loss) under absorption costing? 8223 12 $1,260,000 $ 654,000arrow_forwardRamort Company reports the following for its single product. Ramort produced and sold 20,600 units this year. $ 13 per unit $ 15 per unit $6 per unit $ 41,200 per year $ 2 per unit Direct materials. Direct labor Variable overhead Fixed overhead Variable selling and administrative expenses Fixed selling and administrative expenses Sales price QS 19-12 (Algo) Variable costing and overproduction LO C1 Ramort doubles its production from 20,600 to 41,200 units while sales remain at the current 20,600 unit level. (a) Compute contribution margin when production is 41,200 units under variable costing. (b) What is the change in contribution margin by increasing production from 20,600 units to 41,200 units under variable costing? Complete this question by entering your answers in the tabs below. Required A Required B Compute contribution margin when production is 41,200 units under variable costing. Variable expenses $ 65,800 per year $ 69 per unit Contribution margin RAMORT COMPANY Contribution…arrow_forward
- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax CollegeCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning