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: 0 49,000 Beginning inventory Units produced Units sold Selling price per unit Selling and administrative expen Variable per unit Fixed (per month) Manufacturing costat Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead cont per unit Fixed manufacturing overhead cost per month) $ 565,000 $ 833,000 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. Complete this question by entering your answers in the table below. Reg 1A Req 1B Reg 2A Reg 2B Determine the unit product cost. Assume that the company uses absorption costing. Unit product cost Reg 1A Reg 1B >

Answer 1

1A) Unit produced Fixed Manufacturing Cost Fixed manufacturing cost per unit (833,000/49,000) 49,000 833,000 17 $ Unit product Cost Direct Materials cost per unit Direct labor cost per unit Variable manufacturing cost per unit Fixed manufacturing cost per unit Unit product cost Unit product cost 1B) High Country Inc. Absorption Costing Income Statement Sales revenue (44,000 Ⓡ$ 79) Cost of goods sold (44,000 $44) Gross Profit Selling and administrative expenses Net Income 3,476,000 (1,936,000) 1,540,000 (653,000) 887,000 Working Notes Selling and administrative cost Variable (44,000 x $ 2) Fixed Selling and administrative cost 88,000 565,000 653,000

2A) Unit product Cost Direct Materials cost per unit Direct labor cost per unit Variable manufacturing cost per unit Unit product Cost IN Unit product cost 2B) $ 3,476,000 High Country Inc. Variable Costing Income Statement Sales revenue Less: Variable Expenses Direct materials (44,000 x $ 16) 704,000 Direct labor (44,000 $9) 396,000 Variable manufacturing expense (44,000 $ 2) 88,000 Variable selling and administrative (44,000 $ 2) 88,000 Contribution Margin Less: Fixed Expenses Fixed manufacturing expense 833,000 Fixed Selling and administrative expense 565,000 Net Income (1,276,000) 2,200,000 $ (1,398,000) 802,000