Problem 6-20 Variable and Absorption Costing Unit Product Costs and Income Statements; Explanation of Difference in Net Operating Income [LO6-1, LO6-2, LO6-3]

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 37,000 Units produced 32,000 Units sold $78 Selling price per unit Selling and administrative expenses: Variable per unit $2 560,000 Fixed per month Manufacturing costs: $16 Direct materials cost per unit Direct labor cost per unit $7 Variable manufacturing overhead $3 cost per unit Fixed manufacturing overhead cost$703,000 per month 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: 1. Assume that the company uses absorption costing. a. Determine the unit product cost. nit produ b. Prepare an income statement for May. High Country, Inc. Absorption Costing Income Statement s 0 2. Assume that the company uses variable costing. a. Determine the unit product cost. b. Prepare a contribution format income statement for May. High Country, Inc Variable Costing Income Statement Variable expenses: Fixed expenses