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: 45,000 40,000 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) $570,000 $ 810,000 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. Req 1A Reg 1B Req 2A Req 2B Determine the unit product cost. Assume that the company uses absorption costing. Unit product cost

Answer 1

Answer 1-a.

Unit Product Cost = Direct Materials + Direct Labor + Variable Manufacturing Overhead + Fixed Manufacturing Overhead
Unit Product Cost = $17 + $10 + $2 + $810,000/45,000
Unit Product Cost = $47

Answer 1-b.

High Country, Inc. Absorption Costing Income Statement Sales $ Cost of Goods Sold $ Gross Profit $ Selling and Administrative Expenses $ Net Operating Income 3,160,000 1,880,000 1,280,000 650,000 630,000 $

Sales = 40,000 * $79
Sales = $3,160,000

Cost of goods sold = 40,000 * $47
Cost of goods sold = $1,880,000

Selling and administrative expenses = 40,000 * $2 + $570,000
Selling and administrative expenses = $650,000

Answer 2-a.

Unit Product Cost = Direct Materials + Direct Labor + Variable Manufacturing Overhead
Unit Product Cost = $17 + $10 + $2
Unit Product Cost = $29

Answer 2-b.

$ 3,160,000 High Country, Inc. Variable Costing Income Statement Sales Variable Expenses: Variable Cost of Goods Sold $ 1,160,000 Variable Selling Expense $ 80,000 $ $ 1,240,000 1,920,000 Contribution Margin Fixed Expenses: Fixed Manufacturing Overhead Fixed Selling and Administrative Expenses $ 810,000 570,000 $ $ 1,380,000 540,000 Net Operating Income

Sales = 40,000 * $79
Sales = $3,160,000

Variable cost of goods sold = 40,000 * $29
Variable cost of goods sold = $1,160,000

Variable selling and administrative expenses = 40,000 * $2
Variable selling and administrative expenses = $80,000