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 42,000 Units sold 37,000 Selling price per unit $76 Selling and administrative expenses: Variable per unit $3 Fixed (per month) $ 557,000 Manufacturing costs: Direct materials cost per unit $16 Direct labor cost per unit $9 Variable manufacturing overhead cost per unit $1 Fixed manufacturing overhead cost (per month) $ 672,000 Management is anxious to see how profitable the new camp cot will be and has asked that an income statement be prepared for May. Required: 1. Assume that the company uses absorption costing. a. Determine the unit product cost. Unit product cost b. Prepare an income statement for May. High Country, Inc. Absorption Costing Income Statement 2. Assume that the company uses variable costing. a. Determine the unit product cost. Unit product cost b. Prepare a contribution format income statement for May. High Country, Inc. Variable Costing Income Statement Variable expenses: Fixed expenses:

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		42,000
Units sold		37,000
Selling price per unit		$76
Selling and administrative expenses:
Variable per unit		$3
Fixed (per month)	$	557,000
Manufacturing costs:
Direct materials cost per unit		$16
Direct labor cost per unit		$9
Variable manufacturing overhead cost per unit		$1
Fixed manufacturing overhead cost (per month)	$	672,000

Management is anxious to see how profitable the new camp cot will be and has asked that an income statement be prepared for May.

Required:

1. Assume that the company uses absorption costing.

a. Determine the unit product cost.

Unit product cost

b. Prepare an income statement for May.

High Country, Inc.
Absorption Costing Income Statement

2. Assume that the company uses variable costing.

a. Determine the unit product cost.

Unit product cost

b. Prepare a contribution format income statement for May.

High Country, Inc.
Variable Costing Income Statement

Variable expenses:





Fixed expenses:

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