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It is the end of 2020. Z-Var Corporation began operations in January 2019. The company is so named because it has no variable costs.
It is the end of 2020. Z-Var Corporation began operations in January 2019. The company is so named because it has no variable costs. All its costs are fixed; they do not vary with output. Z-Var Corp. is located on the bank of a river and has its own hydroelectric plant to supply power, light, and heat. The company manufactures a synthetic fertilizer from air and river water and sells its product at a price that is not expected to change. It has a small staff of employees, all paid fixed annual salaries. The output of the plant can be increased or decreased by pressing a few buttons on a keyboard. The following budgeted and actual data are for the operations of Z-Var (Click the icon to view the budgeted and actual data.) Data table The company uses budgeted production as the denominator level and writes off any production-volume variance to cost of goods sold. Sales Production Selling price Costs (all fixed): 2019 22,000 tons 44,000 tons 2020 22,000 tons 0 tons $50 per ton $50 per ton $880,000 $880,000 $99,000 Manufacturing Operating (nonmanufacturing) $99,000 * Management adopted the policy, effective January 1, 2020, of producing only as much product as needed to fill sales orders. During 2020, sales were the same as for 2019 and were filled entirely from inventory at the start of 2020.
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