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
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 plants operation:
Beginning inventory | 0 | |
Units produced | 48,000 | |
Units sold | 43,000 | |
Selling price per unit | $ | 76 |
Selling and administrative expenses: | ||
Variable per unit | $ | 3 |
Fixed (per month) | $ | 566,000 |
Manufacturing costs: | ||
Direct materials cost per unit | $ | 15 |
Direct labor cost per unit | $ | 8 |
Variable manufacturing overhead cost per unit | $ | 2 |
Fixed manufacturing overhead cost (per month) | $ | 768,000 |
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. Assume that the company uses absorption costing.
|
2. Assume that the company uses variable costing.
a. Determine the unit product cost.
b. Prepare a contribution format income statement for May.
Prepare a contribution format income statement for May. Assume that the company uses variable costing.
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