High Country, Inc., produces and sells many recreational products. The company h
ID: 2544499 • Letter: 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 35,000 Units produced Units sold 30,000 576 Selling price per unit Selling and administrative expenses: Variable per unit Fixed per month $3 S 565,000 Manufacturing costs: Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead cost per unit Fixed manufacturing overhead cost per month $15 $7 $2 630,000 Management is anxious to see how profitable the new camp cot will be and has asked that an income statement be prepared for May. Required: 1. Assume that the company uses absorption costing. a. Determine the unit product cost. Unit product cost b. Prepare an income statement for May. High Country, Inc Absorption Costing Income Statement S2,280,000 525,000 1,755,000 S1,755,000Explanation / Answer
Answer:
1. Assume that the company uses absorption costing.
a. Determine the unit product cost.
Particulars
Amount ($)
Direct Materials
15
Direct Labor
7
Variable manufacturing overhead
2
Fixed manufacturing overhead ($630,000/ 35,000)
18
Unit product cost
42
unit product cost=$42
_________________________________________
b.
Absorption costing income statement
High county inc
Absorption costing Income statement
Sales (30,000 * $76)
2,280,000
Cost of goods sold (30,000 * $42)
-1,260,000
Gross margin
1,020,000
Selling and administrative expense
((30,000 * $3) + $559,000)
-655,000
Net Operating income
365,000
______________________________________________
2.
Assume that the company uses variable costing.
a. Determine the unit product cost.
unit product cost under variable costing-
Direct Materials
15
Direct Labor
7
Variable manufacturing overhead
2
Unit product cost
24
_____________________________________________
b. Prepare a contribution format income statement for May.
High county inc
Variable costing Income statement
Sales (30,000 * $76)
2,280,000
Less: Variable expenses
Cost of goods sold (30,000 * $24)
-720,000
Variable selling and administrative expenses (30,000 *$3)
-90,000
Contribution margin
1,470,000
Less: Fixed expense
Fixed manufacturing overhead
-630,000
Fixed selling and administrative expenses
-565,000
Net Operating income
275,000
Particulars
Amount ($)
Direct Materials
15
Direct Labor
7
Variable manufacturing overhead
2
Fixed manufacturing overhead ($630,000/ 35,000)
18
Unit product cost
42
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.