Capello Corporation manufactures and sells one product. In the company's first year of operations, the variable cost consisted solely of direct materials of $93 per unit. The annual fixed costs were $675,000 of direct labor cost, $1,701,000 of fixed manufacturing overhead expense, and $780,000 of fixed selling and administrative expense. The company does not have any variable manufacturing overhead costs or variable selling and administrative costs. During its first year of operations, the company produced 27,000 units and sold 20,000 units. The company's only product is sold for $258 per unit.
Required:
a. Assume the company uses super-variable costing. Compute the unit product cost for the year and prepare an income statement for the year.
b. Assume that the company uses an absorption costing system that assigns $25 of direct labor cost and $63 of fixed manufacturing overhead to each unit that is produced. Compute the unit product cost for the year and prepare an income statement for the year.

Question

Quizplus · Accepted Answer

The Answer of Capello Corporation manufactures and sells one product. In the company's first year of operations, the variable cost consisted solely of direct materials of $93 per unit. The annual fixed costs were $675,000 of direct labor cost, $1,701,000 of fixed manufacturing overhead expense, and $780,000 of fixed selling and administrative expense. The company does not have any variable manufacturing overhead costs or variable selling and administrative costs. During its first year of operations, the company produced 27,000 units and sold 20,000 units. The company's only product is sold for $258 per unit.
Required:
a. Assume the company uses super-variable costing. Compute the unit product cost for the year and prepare an income statement for the year.
b. Assume that the company uses an absorption costing system that assigns $25 of direct labor cost and $63 of fixed manufacturing overhead to each unit that is produced. Compute the unit product cost for the year and prepare an income statement for the year.

Capello Corporation Manufactures and Sells One Product