Question

High Country, Inc., produces and sells many recreational products. The company has just opened a new plant to produce a folding camp cot that will be marketed throughout the United States. The following cost and revenue data relate to May, the first month of the plant's operation: 10 points 49,000 44,000 84 eBook Beginning inventory Units produced Units sold Selling price per unit Selling and administrative expenses: Variable per unit Fixed (per month) Manufacturing costs: Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead cost per unit Fixed manufacturing overhead cost (per month) $ 3 $ 568,000 Print $ 1 $ 980,000 References Management is anxious to assess the profitability of the new camp cot during the month of May. Required: 1. Assume that the company uses absorption costing. a. Determine the unit product cost. b. Prepare an income statement for May. 2. Assume that the company uses variable costing. a. Determine the unit product cost. b. Prepare a contribution format income statement for May. Complete this question by entering your answers in the table below. Req 1A Reg 1B Req 2A Req 2B Determine the unit product cost. Assume that the company uses absorption costing. Unit product cost < Req 1A Req1B >

Answer 1

ABSORPTION COSTING

Ques 1
a.
Direct materials	14
Direct labor	7
Variable manufacturing overhead	1
Fixed manufacturing overhead	20
(980000/49000)
Absorption costing unit product cost	42
b.
Income statement
Sales	3696000
(44000*84)
Cost of goods sold	1848000
(44000*42)
Gross Margin	1848000
Sales and administrative expenses	700000
(44000*3)+568000
Net operating income	1148000

VARIABLE COSTING

Ques 2
a.
Direct materials	14
Direct labor	7
Variable manufacturing overhead	1
Absorption costing unit product cost	22
Income statement
Sales		3696000
(44000*84)
Variable expenses
Variable cost of goods sold	968000
(44000*22)
Variable selling expenses	132000
(44000*3)
		1100000
Contribution Margin		2596000
Fixed expenses
Fixed mfr overhead	980000
fixes selling and administrative expenses	568000
		1548000
Net operating income		1048000