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

4.0 Ratings (705 Votes)

1a
Direct materials cost	15
Direct labor cost	6
Variable manufacturing overhead	3
Fixed manufacturing overhead	16		=656000/41000
Unit product cost	40

1b
Absorption Costing Income Statement
Sales	2772000		=36000*77
Cost of goods sold	1440000		=36000*40
Gross profit	1332000
Selling and administrative expenses	675000		=567000+(36000*3)
Net operating income	657000

2a
Direct materials cost	15
Direct labor cost	6
Variable manufacturing overhead	3
Unit product cost	24

2b
Variable Costing Income Statement
Sales		2772000	=36000*77
Variable expenses:
Variable cost of goods sold	864000		=36000*24
Variable selling and administrative expenses	108000		=36000*3

		972000
Contribution margin		1800000
Fixed expenses:
Fixed manufacturing overhead	656000
Fixed selling and administrative expenses	567000

		1223000
Net operating income		577000

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Beginning inventory		0
Units produced		41,000
Units sold		36,000
Selling price per unit	$	77
Selling and administrative expenses:
Variable per unit	$	3
Fixed (per month)	$	567,000
Manufacturing costs:
Direct materials cost per unit	$	15
Direct labor cost per unit	$	6
Variable manufacturing overhead cost per unit	$	3
Fixed manufacturing overhead cost (per month)	$	656,000

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