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High Country, Inc., produces and sells many recreational products. The company has just opened a new...

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 44,000 Units sold 39,000 Selling price per unit $ 84 Selling and administrative expenses: Variable per unit $ 3 Fixed (per month) $ 570,000 Manufacturing costs: Direct materials cost per unit $ 17 Direct labor cost per unit $ 8 Variable manufacturing overhead cost per unit $ 2 Fixed manufacturing overhead cost (per month) $ 880,000 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

Solutions

Expert Solution

1a) Unit product cost under absorption costing
Direct materials 17
direct labor 8
variable MOH 2
Fixed MOH (880,000/44000) 20
unit product cost 47 answer
1b) Absorption costing income statement
sales (39000*84) 3276000
cost of goods sold (39000*47) 1833000
Gross profit 1443000
selling & administrative expense
variable selling&adm expense 117000
fixed selling & adm expense 570,000 687,000
Net income 756,000
2a) unit product cost under variable costing
Direct materials 17
direct labor 8
variable MOH 2
unit product cost under variable costing 27
2b) Contribution format
Sales 3276000
less variable expense
cost of goods sold 1053000
selling and adm expense 117000 1170000
Contribtution margin 2106000
fixed expense
fixed MOH 880,000
Fixed selling & adm expense 570000 1,450,000
Net income 656,000

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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 related to May, the first month of the plant’s operation: Beginning inventory 0 Units produced 47,000 Units sold 42,000 Selling price per unit $ 85 Selling and administrative expenses: Variable per unit $ 2 Fixed (per month) $ 561,000 Manufacturing costs: Direct materials...
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