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

3.6 Ratings (577 Votes)

1. Assume that the company uses absorption costing.

a. Determine the unit product cost.

Direct material	15
Direct labor	10
Variable manufacturing overhead	4
Fixed manufacturing overhead (864000/48000)	18
Unit product cost	47

b) Income statement

Sales (43000*77)	3311000
Cost of goods sold (43000*47)	2021000
Gross profit	1290000
Selling and administrative expense (43000*4+558000)	730000
Net operating income	560000

2. Assume that the company uses variable costing.

a. Determine the unit product cost.

Direct material	15
Direct labor	10
Variable manufacturing overhead	4
Unit product cost	29

b) Income statement

Sales (43000*77)		3311000
Variable Cost of goods sold (43000*29)		1247000
Manufacturing margin		2064000
Variable selling and administrative expense (43000*4)		172000
Contribution margin		1892000
Fixed cost
Fixed manufacturing overhead	864000
Fixed Selling and administrative expense	558000	1422000
Net operating income		470000

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member


Beginning inventory		0
Units produced		48,000
Units sold		43,000
Selling price per unit	$	77
Selling and administrative expenses:
Variable per unit	$	4
Fixed (per month)	$	558,000
Manufacturing costs:
Direct materials cost per unit	$	15
Direct labor cost per unit	$	10
Variable manufacturing overhead cost per unit	$	4
Fixed manufacturing overhead cost (per month)	$	864,000

Other questions asked by students