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High Country, Inc., produces and sells many recreational products. The company has just opened a new plant to produce a foldi

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Answer #1

Solution 1a:

Computation of Unit Product Cost - Absorption Costing
Particulars Per unit
Unit Product Cost:
Variable manufacturing cost $25.00
Fixed manufacturing overhead
(666,000 / 37000)
$18.00
Unit Product Cost $43.00

Solution 1b:

High Country Inc.
Full Absorption income statement
Particulars Details Amount
Sales $2,528,000.00
Cost of Goods Sold:
Cost of goods produced (37000*$43) $1,591,000.00
Add: Opening Inventory $0.00
Less: Ending Inventory (5000*$43) $215,000.00 $1,376,000.00
Gross Profit $1,152,000.00
Variable Selling & administrative expenses $96,000.00
fixed Selling & administrative expenses $568,000.00
Net Operating Income $488,000.00

Solution 2a:

Computation of Unit Product Cost - Variable Costing
Particulars Per unit
Unit Product Cost:
Direct material $14.00
Direct Labor $7.00
Variable manufacturing overhead $4.00
Unit product cost $25.00

Solution 2b:

High Country Inc.
Contribution margin income statement
Particulars Per unit Amount
Sales $79.00 $2,528,000.00
Variable costs:
Variable manufacturing cost $25.00 $800,000.00
Variable Selling and administrative expenses $3.00 $96,000.00
Contribution $51.00 $1,632,000.00
Fixed Manufacturing Costs $666,000.00
fixed Selling & administrative expenses $568,000.00
Net Income $398,000.00
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