S Sonoma State U Chapter 06 HW High C plant to produce a and revenue data relate

Question

S Sonoma State U Chapter 06 HW High C plant to produce a and revenue data relate to May, the first month of the plant's operation Inc, produces and sells many recreational products. The has just opened a new following cost folding camp cot that will be marketed the United States. The Units produced Units sold 49,000 44,000 $80 Seling price per unit Seling and administrative expenses Varlable per un Fixed per month $4 $ 556,000 Manufacturing costs Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead cost per unit Fixed manufacturing overhead cost per month $14 57 52 980,000 to see how profitable the new camp cot will be and has asked that an income statement be prepared for May 1. Assume that the company uses absorption costing a. Determine the unit product cost b. Prepare an income statement for May High Country, Inc Absorption Costing Income Statement Type here to search

Explanation / Answer

2.

Notice that the fixed manufacturing overhead cost has not been included while computing the cost of one unit under variable costing system.

Selling and administrative expenses (both variable and fixed) are not relevant for the computation of unit product cost.

Computation of Unit Product Cost Absorption Costing Direct Meterial $                               14 Direct Labour $                                  7 Variable Manufactoring Overhead $                                  2 Fixed Manufactoring Overhead ($980,000 / 49,000) $                               20 Unit Product Cost $                               43

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