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 45,000 Units sold 40,000 Selling price per unit $ 81 Selling and administrative expenses: Variable per unit $ 2 Fixed (per month) $ 561,000 Manufacturing costs: Direct materials cost per unit $ 15 Direct labor cost per unit $ 9 Variable manufacturing overhead cost per unit $ 2 Fixed manufacturing overhead cost (per month) $ 720,000 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. 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. REQUIRED 1 a Determine the unit product cost. Assume that the company uses absorption costing. Unit product cost REQUIRED 1 b Prepare an income statement for May. Assume that the company uses absorption costing. High Country, Inc. Absorption Costing Income Statement REQUIRED 2a Determine the unit product cost. Assume that the company uses variable costing. Unit product cost REQUIRED 2b Prepare a contribution format income statement for May. Assume that the company uses variable costing. High Country, Inc. Variable Costing Income Statement

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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		45,000
Units sold		40,000
Selling price per unit	$	81
Selling and administrative expenses:
Variable per unit	$	2
Fixed (per month)	$	561,000
Manufacturing costs:
Direct materials cost per unit	$	15
Direct labor cost per unit	$	9
Variable manufacturing overhead cost per unit	$	2
Fixed manufacturing overhead cost (per month)	$	720,000

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. 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.

REQUIRED 1 a

Determine the unit product cost. Assume that the company uses absorption costing.

Unit product cost

REQUIRED 1 b

Prepare an income statement for May. Assume that the company uses absorption costing.

High Country, Inc.
Absorption Costing Income Statement

REQUIRED 2a

Determine the unit product cost. Assume that the company uses variable costing.

Unit product cost

REQUIRED 2b

Prepare a contribution format income statement for May. Assume that the company uses variable costing.

High Country, Inc.
Variable Costing Income Statement

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