High Country Inc produces and sells many recreational produc

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:

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.

PLEASE EXPLAIN AND BOLD ALL ANSWERS THANKS

1A. Determine the unit product cost. Assume that the company uses absorption costing.

1B. Prepare an income statement for May. Assume that the company uses absorption costing.

Advertising
Beginning merchandise inventory
Commissions
Cost of goods sold
Depreciation
Direct labor
Direct materials
Ending merchandise inventory
Fixed manufacturing overhead
Indirect labor
Indirect materials
Purchases
Sales
Selling and administrative expenses
Variable manufacturing overhead

2A... Determine the unit product cost. Assume that the company uses variable costing.

2B... Prepare a contribution format income statement for May. Assume that the company uses variable costing.

Beginning inventory		0
Units produced		50,000
Units sold		45,000
Selling price per unit	$	78
Selling and administrative expenses:
Variable per unit	$	4
Fixed (per month)	$	560,000
Manufacturing costs:
Direct materials cost per unit	$	15
Direct labor cost per unit	$	7
Variable manufacturing overhead cost per unit	$	2
Fixed manufacturing overhead cost (per month)	$	900,000

Solution

1(a)Unit Product Cost - Absorbtion Costing Unit Cost Direct Materials $15 Direct Labor $7 Variable Manufacturing Overhead $2 Fixed Manufacturing Overhead ($90000/50000) $18 Total Unit Cost $42 1(b) Income Statement-Using Absorption Costing Amount Amount Sales (45000 *$78) $3,510,000 Less: Cost of goods sold: Beginning inventory $0 Ad: Cost of goods produced (50000*42) $2,100,000 Costs of goods available for sale $2,100,000 Less: Ending inventory (5000*$42) $210,000 Cost of goods sold $1,890,000 Gross Profit $1,620,000 Less: Selling & Administration Exp: Variable ($4*45000) $180,000 Fixed $560,000 $740,000 Net Operating Income $880,000 2(a)(Unit Product Cost- Variable Costing Direct Materials $15 Direct Labor $7 Variable Manufacturing Overhead $2 Variable Selling & Adm Cost $4 Total Unit Cost $28 2(b) INCOME STATEMENT USING VARIABLE COSTING Sales (45000 *$78) $3,510,000 Variable Cost ($28*45000) $1,260,000 Gross Contribution Margin $2,250,000 Less: Fixed costs: Fixed Manufacturing Cost $900,000 Selling and administration $560,000 $1,460,000 Net Operating Income $790,000