10.00 points High Country, Inc., produces and sells many recreational products.
ID: 2456480 • Letter: 1
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: Units produced Units sold 44,000 39,000 $77 Selling price per unit Selling and administrative expenses: Variable per unit Fixed per month $4 $569,000 Manufacturing costs: $16 S7 Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead cost per unit Fixed manufacturing overhead cost per month $836,000 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. F5 2 3 4 5 6Explanation / Answer
SOLUTION :
1a.UNIT PRODUCT COST UNDER ABSORBTION COSTING
DIRECT MATERIAL
16
DIRECT LABOR
7
VARIABLE MANUFACTURING COST
2
FIXED MANUFACTURING COST
19
UNIT PRODUCT COST
44
1b.income statement for may
Sales
3003000
COGS
OPENING INVENTORY
0
COST OF GOODS MANUFACTURED (44000*44)
1936000
1936000
CLOSING STOCK (44000-39000)*44
220000
COGS
1716000
GP
1287000
SELLING & ADMINISTRATIVE
VARIABLE (39000*4)
156000
FIXED
569000
725000
NET OPERATING INCOME
562000
2a.UNIT PRODUCT COST UNDER ABSORBTION COSTING
DIRECT MATERIAL
16
DIRECT LABOR
7
VARIABLE MANUFACTURING COST
2
FIXED MANUFACTURING COST
0
UNIT PRODUCT COST
25
2b.income statement for may
Sales
3003000
Variable cost of goods sold
OPENING INVENTORY
0
COST OF GOODS MANUFACTURED (44000*25)
1100000
1100000
CLOSING STOCK (44000-39000)*25
125000
975000
contribution
2028000
VARIABLE SELLING & ADMINISTRATIVE
156000
1872000
FIXED COST
MANUFACTURING
836000
SELLING & ADMINISTRATIVE
569000
1405000
NET OPERATING INCOME
467000
1a.UNIT PRODUCT COST UNDER ABSORBTION COSTING
DIRECT MATERIAL
16
DIRECT LABOR
7
VARIABLE MANUFACTURING COST
2
FIXED MANUFACTURING COST
19
UNIT PRODUCT COST
44
1b.income statement for may
Sales
3003000
COGS
OPENING INVENTORY
0
COST OF GOODS MANUFACTURED (44000*44)
1936000
1936000
CLOSING STOCK (44000-39000)*44
220000
COGS
1716000
GP
1287000
SELLING & ADMINISTRATIVE
VARIABLE (39000*4)
156000
FIXED
569000
725000
NET OPERATING INCOME
562000
2a.UNIT PRODUCT COST UNDER ABSORBTION COSTING
DIRECT MATERIAL
16
DIRECT LABOR
7
VARIABLE MANUFACTURING COST
2
FIXED MANUFACTURING COST
0
UNIT PRODUCT COST
25
2b.income statement for may
Sales
3003000
Variable cost of goods sold
OPENING INVENTORY
0
COST OF GOODS MANUFACTURED (44000*25)
1100000
1100000
CLOSING STOCK (44000-39000)*25
125000
975000
contribution
2028000
VARIABLE SELLING & ADMINISTRATIVE
156000
1872000
FIXED COST
MANUFACTURING
836000
SELLING & ADMINISTRATIVE
569000
1405000
NET OPERATING INCOME
467000
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