(Appendix 5A)Ellert Corporation Manufactures and Sells One Product

question 7

Essay

(Appendix 5A)Ellert 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 52, 000 units and sold 51, 000 units.The company's only product is sold for $251 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 $26 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.

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Definitions:

Commercial Paper

An unsecured, short-term debt instrument issued by corporations to finance their immediate operational needs.

Maturity

The stage in a product’s lifecycle or a company’s growth where growth slows down, and it reaches a steady state of maximum output or sales.

Secured

Protected against threat or harm, or in financial terms, backed by collateral.

Venture Capitalist

An investor who provides capital to start-up companies or supports small companies that wish to expand but do not have access to equities markets.