7. High Country, Inc., produces and sells many recreational products. The compan

Question

7. High Country, Inc., produces and sells many recreational products. The company has just opened a new plant to produce a folding camp cot that wll 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 44.000 39,000 $81 Variable per unit Fixed per month $2 $ 557,000 Manufacturing costs: Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead cost per unit Fixed manufacturing overhead cost per month$6601000 $17 s6 $3 , 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

Construct The Absorption Costing Unit Product Cost May Direct Material 17 Direct labour 6 Variable Manufacturing overheads 3 Fixed Manufacturing overheads 15.00 Absorption costing unit prroduct cost 41.00 Construct the Absorption Costing Income Statement Under FIFO May Sales $3,159,000 Cost of Goods sold 1599000 Gross Margin $1,560,000 Selling and distribution expense 635,000 Net operating income 925,000 Compute the Variable costing Unit Product cost May Direct Material 17 Direct labour 6 Variable Manufacturing overheads 3 Variable costing unit product cost 26 Construct The Variable Costing Income Statement under FIFO May Sales 3,159,000 Less: Variable cost    variable cost of goods sold 1,014,000    Variable selling expense 78,000 1,092,000 Contribution margin 2,067,000 Fixed expense:    Fixed Manufacturing overheads 660,000    Fixed selling expense 557,000 Net operating Income 850,000

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