High Country, Incorporated, 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 Units produced Units sold Selling price per unit Selling and administrative expenses: Variable per unit 0 41,000 36,000 $85 $2 $ 559,000 Fixed (per month) Manufacturing costs: Direct materials cost per unit $ 16 Direct labor cost per unit $8 Variable manufacturing overhead cost per unit $4 Fixed manufacturing overhead cost (per month) $ 779,000 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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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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High Country, Incorporated, 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
Units produced
Units sold
Selling price per unit
Selling and administrative expenses:
Variable per unit
0
41,000
36,000
$85
$2
$ 559,000
Fixed (per month)
Manufacturing costs:
Direct materials cost per unit
$ 16
Direct labor cost per unit
$8
Variable manufacturing overhead cost per unit
$4
Fixed manufacturing overhead cost (per month)
$ 779,000
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.
Transcribed Image Text:High Country, Incorporated, 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 Units produced Units sold Selling price per unit Selling and administrative expenses: Variable per unit 0 41,000 36,000 $85 $2 $ 559,000 Fixed (per month) Manufacturing costs: Direct materials cost per unit $ 16 Direct labor cost per unit $8 Variable manufacturing overhead cost per unit $4 Fixed manufacturing overhead cost (per month) $ 779,000 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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