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PROBLEM 5-12 Variable and Absorption Costing Unit Product Costs and Income Statements; Explanation of Difference in Net Operating Income [LO1, LO2, LO3] High Country. Inc.,
PROBLEM 5-12 Variable and Absorption Costing Unit Product Costs and Income Statements; Explanation of Difference in Net Operating Income [LO1, LO2, LO3] 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 @jee ?t yew mert Fgmat Tools Data yrdow ?b AdkePOF - De a ??[2? ????|?.ra ,??100% ? E20 1 Beginning 2 Units produced 3 Units sold 4 Sclling price per unit 0 10,000 8,000 $75 6 Selling and administrative expenses 7 Variable per uri 8 Fixed (total) 9 Manufacturing costs 10 Direct matenals cost per unit 11 Direct labor cost per unit 12 Variable manufacturing overhead cost per unit 13 Fixed manufacturing overhead cost 14 $0 $200,000 S20 $8 S2 $100,000 Management is anxious to see how profitable the new camp cot will be and has asked that an income statement be prepared for May Required: I. Assume that the company uses absorption costing. a. Determine the unit product cost. b. Prepare an income statement for Mav Assume that the company uses variable costing a. Determine the unit product cost b. Prepare a contribution format income statement for May Explain the reason for any difference in the ending inventory balances under the two costing methods and the impact of this difference on reported net operating income 2. 3
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