Drucker Corporation manufactures and sells one product. In the company's first year of operations, the variable cost consisted solely of direct materials of $84 per unit. The annual fixed costs were $288,000 of direct labor cost, $1,728,000 of fixed manufacturing overhead expense, and $782,000 of fixed selling and administrative expense. The company does not have any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, the company produced 24,000 units and sold 17,000 units. The company's only product is sold for $249 per unit.Required:a. Assume the company uses super-variable costing. Compute the unit product cost for the year.b. Assume the company uses super-variable costing. Prepare an income statement for the year.
What will be an ideal response?
a.
Under super-variable costing, the unit product cost is just the direct materials cost of $84 per unit.
b.
Super-variable costing income statement:
| Sales ($249 per unit × 17,000 units) | $ | 4,233,000 | ||||
| Variable cost of goods sold ($84 per unit × 17,000 units) | 1,428,000 | |||||
| Contribution margin | 2,805,000 | |||||
| Fixed expenses: | ||||||
| Direct labor | $ | 288,000 | ||||
| Fixed manufacturing costs | 1,728,000 | |||||
| Fixed selling and administrative expense | 782,000 | 2,798,000 | ||||
| Net operating income | $ | 7,000 | ||||
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