Question

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: 0 10,000 8,000 75 $ Beginning inventory Units produced Units sold Selling price per unit Selling and administrative expenses : Variable per unit Fixed (per month) Manufacturing costs: Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead cost per unit - Fixed manufacturing overhead cost (per month) $ 6 $ 200,000 $ 20 $ 8 $ 2 $ 100,000 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, Complete this question by entering your answers in the table below. w wee 3 of 6 Score answer > < Prev

Answer 1

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High Country
Workings for Answer 1 a	Amount $	Note
Fixed manufacturing overhead	100,000.00	A
Units produced	10,000.00	B
Fixed manufacturing overhead per unit	10.00	C=A/B
Answer 1 a	Amount $
Direct materials	20.00
Direct labor	8.00
Variable manufacturing overhead	2.00
Fixed manufacturing overhead	10.00	See C
Unit product cost- Absorption costing	40.00	D
Workings for Answer 1 b	Amount $
Units sold	8,000.00	E
Sell price	75.00	F
Sales value	600,000.00	G=E*F
Cost of goods sold	320,000.00	H=E*D
Variable selling and admin per unit	6.00	I
Variable selling and admin expense	48,000.00	J=I*E
Answer 1 b
Absorption costing income statement	Amount $
Sales	600,000.00	See G
Costs of goods sold	320,000.00	See H
Gross profit	280,000.00
Less: Operating expenses
Fixed selling and admin	200,000.00
Variable selling and admin	48,000.00	See J
Operating Income	32,000.00
Answer 2 a	Amount $
Direct materials	20.00
Direct labor	8.00
Variable manufacturing overhead	2.00
Unit product cost- Variable costing	30.00	K
Workings for Answer 2 b	Amount $
Cost of goods sold	240,000.00	L=K*E
Answer 2 b
Contribution format income statement	Year 1
Sales	600,000.00	See G
Less: Variable costs
Costs of goods sold	240,000.00	See L
Selling and admin expense	48,000.00	See J
Contribution margin	312,000.00
Less: Fixed costs
Fixed manufacturing overhead	100,000.00
Fixed selling and admin	200,000.00
Operating Income	12,000.00