High Country, Inc., produces and sells many recreational products. The company has just opened a new plant to produce a folding camp cot that will 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 0Units produced 37,000Units sold 32,000Selling price per unit$83Selling and administrative expenses: Variable per unit$2Fixed (per month)$559,000Manufacturing costs: Direct materials cost per unit$14Direct labor cost per unit$6Variable manufacturing overhead cost per unit$2Fixed manufacturing overhead cost (per month)$740,000 Management is anxious to assess the profitability of the new camp cot during the month of May. Required:1. Assume that the company uses absorption costing.a. Calculate the unit product cost.b. Prepare an income statement for May.2. Assume that the company uses variable costing.a. Calculate the unit product cost.b. Prepare a contribution format income statement for May.

Under absorption costing, fixed manufacturing overhead is also considered while calculating the unit…

Answered: 1. Assume that the company uses…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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High Country, Inc., produces and sells many recreational products. The company has just opened a new plant to produce a folding camp cot that will 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		0
Units produced		37,000
Units sold		32,000
Selling price per unit	$	83
Selling and administrative expenses:
Variable per unit	$	2
Fixed (per month)	$	559,000
Manufacturing costs:
Direct materials cost per unit	$	14
Direct labor cost per unit	$	6
Variable manufacturing overhead cost per unit	$	2
Fixed manufacturing overhead cost (per month)	$	740,000

Management is anxious to assess the profitability of the new camp cot during the month of May.

Required:

1. Assume that the company uses absorption costing.

a. Calculate the unit product cost.

b. Prepare an income statement for May.

2. Assume that the company uses variable costing.

a. Calculate the unit product cost.

b. Prepare a contribution format income statement for May.

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