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:

Management is anxious to see how profitable the new camp cot will be and has asked that an income statement be prepared for May.

Beginning inventory 0 Units produced 41,000 Units sold 36,000 Selling price per unit $82 Selling and administrative expenses: Variable per unit $4 Fixed (per month) $ 568,000 Manufacturing costs: Direct materials cost per unit $16 Direct labor cost per unit $9 Variable manufacturing overhead cost per unit $3 Fixed manufacturing overhead cost (per month) $ 615,000 Required: 1. Assume that the company uses absorption costing a. Determine the unit product cost. b. Prepare an income statement for May. High Country, inc. Abeorption Costing Income statement 2. Assume that the company uses variable costing. a. Determine the unit product cost nit produch coet b. Prepare a contribution format income statement for May. High Country, Inc. Varlable Costing Income Statement Varlabla expenees: Fed expenses:

Explanation / Answer

Answers

Fixed manufacturing overhead

$615000

Units produced

41000

Fixed manufacturing cost per unit

$15

Product Units Cost

Absorption Costing

Variable Costing

Direct material per unit

$16

$16

Direct labor per unit

$9

$9

variable manufacturing overhead per unit

$3

$3

Fixed manufacturing cost per unit

$15

Product Unit Cost

$43

$28

Sales

36000 x $82

$2952000

(-) Cost of Goods Sold

36000 x $43

$1548000

Gross Margin/Profits

$1404000

(-) Selling & Administrative expenses

[36000 x $4] + [568000]

$712000

Net Income

$692,000

Sales

2952000

Variable Expenses:

Direct material

576000

Direct labor

324000

variable manufacturing overhead

108000

Variable selling & administrative

144000

1152000

Contribution margin

$1,800,000

Fixed expenses:

manufacturing overhead

615000

selling & administrative expenses

568000

1183000

Net Income

$617,000

Fixed manufacturing overhead

$615000

Units produced

41000

Fixed manufacturing cost per unit

$15

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