10.00 points High Country, Inc., produces and sells many recreational products T

Question

10.00 points 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: 38,000 33,000 $76 Variable per unit Fixed per month $4 567,000 costs: Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead cost per unit Fixed manufacturing overhead cost per month $15 $6 $3 $684,000 Management is anxious to see how profitable the new camp cot will be and has asked that an income statement be prepared for May

Explanation / Answer

Answer:

a) Income Statement (Absorption Costing)

b) Income Statement (using variable costing)

Particulars Per Unit Total Sales $ 76.00 $ 2,508,000 ($ 76 x 33,000) Less: Direct Material Cost $ 15.00 $ 495,000 ($ 15 x 33,000) Direct Labour Cost $ 6.00 $ 198,000 ($ 6 x 33,000) Manufacturing Overheads Variable $ 3.00 $ 99,000 ($ 3 x 33,000) Fixed $18.00 ($ 684,000 / 38,000) $ 594,000 Selling & Admin Cost Variable $ 4.00 $ 132,000 Fixed $ 17.1818 ($ 567,000 / 33,000) $ 567,000 Total Cost of Goods Sold $ 63.1818 $ 2,085,000 Net Income $ 12.8182 $ 423,000

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