Question

Check my work 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: 37,000 32, eee 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) $ 557,000 $ 629,000 Management is anxious to assess the profitability of the new camp cot during the month of May. Required: 1 Accumo that the roma TICOS Aherntinn rnctinn

Answer 1

Solution 1a:

Computation of Unit Product Cost - Absorption Costing
Particulars	Per unit
Unit Product Cost:
Variable manufacturing cost	$27.00
Fixed manufacturing overhead (629,000 / 37000)	$17.00
Unit Product Cost	$44.00

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*$44)	$1,628,000.00
Add: Opening Inventory	$0.00
Less: Ending Inventory (5000*$44)	$220,000.00	$1,408,000.00
Gross Profit		$1,120,000.00
Variable Selling & administrative expenses		$96,000.00
fixed Selling & administrative expenses		$557,000.00
Net Operating Income		$467,000.00

Solution 2a:

Computation of Unit Product Cost - Variable Costing
Particulars	Per unit
Unit Product Cost:
Direct material	$16.00
Direct Labor	$8.00
Variable manufacturing overhead	$3.00
Unit product cost	$27.00

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	$27.00	$864,000.00
Variable Selling and administrative expenses	$3.00	$96,000.00
Contribution	$49.00	$1,568,000.00
Fixed Manufacturing Costs		$629,000.00
fixed Selling & administrative expenses		$557,000.00
Net Income		$382,000.00