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PROBLEM 6-20 Variable and Absorption Costing Unit Product Costs and Income Statements; Explanation of Difference in Net Operating Income High Country, Inc., produces and sells

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PROBLEM 6-20 Variable and Absorption Costing Unit Product Costs and Income Statements; Explanation of Difference in Net Operating Income High Country, Inc., produces and sells many recreational products. The company has just opened Table Summary: Top of table shows unit descriptions in first column and number of units in second column for rows 1-3. Row 4 is a dollar value. MIddle of table shows selling and administrative expenses and bottom shows manufacturing costs. Second and third sections show descriptions in first column and dollar values in second column. 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. Calculate the unit product cost. b. Prepare an income statement for May. 2. Assume that the company uses variable costing. a. Calculate the unit product cost. b. Prepare a contribution format income statement for May. 3. 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

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