High Country, Inc., produces and sells many recreational products. The company has just opened a new...

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Accounting

High Country, Inc., produces and sells many recreationalproducts. The company has just opened a new plant to produce afolding camp cot that will be marketed throughout the UnitedStates. The following cost and revenue data relate to May, thefirst month of the plant’s operation:
Beginning inventory 0
Units produced 38,000
Units sold 33,000
Selling price per unit $ 80
Selling and administrative expenses:
Variable per unit $ 3
Fixed (per month) $ 561,000
Manufacturing costs:
Direct materials cost per unit $ 15
Direct labor cost per unit $ 10
Variable manufacturing overhead cost per unit $ 2
Fixed manufacturing overhead cost (per month) $ 684,000
Management is anxious to assess the profitability of the newcamp cot during the month of May.
Required:
1. Assume that the company uses absorption costing.
a. Determine the unit product cost.
b. Prepare an income statement for May.
2. Assume that the company uses variable costing.
a. Determine the unit product cost.
b. Prepare a contribution format income statement for May.

Answer & Explanation Solved by verified expert

3.7 Ratings (584 Votes)

Ans 1 a In Absorption costing method the unit product cost is the sum of all manufacturing costs per unit whether it is fixed or variable Unit product cost under Absorption Costing Direct materials 1500 Direct labor 1000 Variable Overhead per unit 200 Fixed overhead per unit 684000 38000 1800 Product Cost per unit 4500 Fixed overhead per unit Fixed overhead Units produced Ans 1 b HIGH COUNTRY See Answer

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Beginning inventory		0
Units produced		38,000
Units sold		33,000
Selling price per unit	$	80
Selling and administrative expenses:
Variable per unit	$	3
Fixed (per month)	$	561,000
Manufacturing costs:
Direct materials cost per unit	$	15
Direct labor cost per unit	$	10
Variable manufacturing overhead cost per unit	$	2
Fixed manufacturing overhead cost (per month)	$	684,000