High Country, Inc., produces and sells many recreational products. The company h

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 Beginning inventory Units produced Units sold Selling price per unit Selling and administrative expenses 10,000 8,000 $75 Variable per unit Fixed per month $6 $ 200,000 Manufacturing costs Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead cost per unit Fixed manufacturing overhead cost per month $20 $8 $2 $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 1. Assume that the company uses absorption costing a. Determine the unit product cost. Unit product cost b. Prepare an income statement for May High Country, Inc Absorption Costing Income Statement

Explanation / Answer

1a Direct materials 20 Direct labor 8 Variable manufacturing overhead 2 Fixed manufacturing overhead 10 Unit product cost 40 b Sales 600000 =8000*75 Cost of goods sold 320000 =8000*40 Gross Margin 280000 Selling and administrative expenses 248000 =200000+(8000*6) Net operating income 32000

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