Mendoza Corporation Manufactures and Sells One Product

Essay

Mendoza Corporation manufactures and sells one product. The following information pertains to the company's first year of operations: 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 47,000 units and sold 45,000 units. The company's only product is sold for $275 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 a variable costing system that assigns $24 of direct labor cost to each unit that is produced. Compute the unit product cost for the year and prepare an income statement for the year.
c. Prepare a reconciliation that explains the difference between the super-variable costing and variable costing net incomes.