Question

Can you please provide complete work/steps to solve requirements 1-2 for this problem?? Thank you!

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: 0 47,000 42,000 79 $ 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) 2 $ 567,000 17 9 2 $ 752,000 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.

Answer 1

1a
Direct materials cost	17
Direct labor cost	9
Variable manufacturing overhead	2
Fixed manufacturing overhead	16		=752000/47000
Unit product cost	44
1b
Sales	3318000		=42000*79
Cost of goods sold	1848000		=42000*44
Gross profit	1470000
Selling and administrative expenses	651000		=567000+(42000*2)
Net operating income	819000
2a
Direct materials cost	17
Direct labor cost	9
Variable manufacturing overhead	2
Unit product cost	28
2b
Sales		3318000	=42000*79
Variable expenses:
Variable cost of goods sold	1176000		=42000*28
Variable selling and administrative expenses	84000		=42000*2
		1260000
Contribution margin		2058000
Fixed expenses:
Fixed manufacturing overhead	752000
Fixed selling and administrative expenses	567000
		1319000
Net operating income		739000