Question
Part A: Variable and Absorption Costing Unit Product Costs and Income Statements High Country, Inc., produces...
Part A: Variable and Absorption Costing Unit Product Costs and Income Statements
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 related to May, the first month of the plant’s operation:
|
Beginning inventory |
0 |
|
|
Units produced |
10,000 |
|
|
Units sold |
8,000 |
|
|
Selling price per unit |
$ |
75 |
|
Selling and administrative expenses: |
||
|
Variable per unit |
$ |
6 |
|
Fixed (per month) |
$ |
200,000 |
|
Manufacturing costs: |
||
|
Direct materials cost per unit |
$ |
20 |
|
Direct labor cost per unit |
$ |
8 |
|
Variable manufacturing overhead cost per unit |
$ |
2 |
|
Fixed manufacturing overhead cost (per month) |
$ |
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.
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