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Item4

Item 4 25 points Item Skipped

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:

Beginning inventory		0
Units produced		40,000
Units sold		35,000
Selling price per unit	$	83
Selling and administrative expenses:
Variable per unit	$	3
Fixed (per month)	$	561,000
Manufacturing costs:
Direct materials cost per unit	$	17
Direct labor cost per unit	$	7
Variable manufacturing overhead cost per unit	$	2
Fixed manufacturing overhead cost (per month)	$	680,000

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

Requirement 1B Absorption costing income statement : Requirement 2(B) Variable costing income statement : Requirement 1a) Unit Product cost under absorption costing: Direct material Direct labour Variable manfacturing Overhead Fixed manfacturing Overhead $ 29,05,000.00 17.000 7.000 2.000 17.00 $ Sales Less: Cost of goods sold Gross Margin Less: Selling and admin expense Net Operating Income $ 29,05,000,00 $ 15,05,000.00 $ 14,00,000,00 $ 6,66,000.00 $ 7,34,000.00 $ 9,10,000,00 $ 1,05,000.00 $ 18,90,000.00 $ Sales Variable expense : Variable cost of goods sold Variable Selling and admin expense Contribution margin Fixed expense : Fixed manfacturing Overhead Fixed Selling and admin expense Net Operating income 43,000 Requirement 2A Unit Product cost under Variable costing: Direct material Direct labour Variable manfacturing Overhead $ $ $ 17.00 7.00 2.00 6,80,000.00 5,61,000.00 6,49,000,00 श्री $ 26.000 $ 17,20,000,00 Note : Cost of goods sold : Beginning Inventory Add: cost of goods manfactured 40000*43 Goods available for sale Less : Ending inventory 5000*43 Cost of goods sold $ 17,20,000.00 $ (2,15,000) $ 15,05,000