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: Beginning inventory Units produced Units sold Selling price per unit Selling and administrative expenses: 0 42,000 37,000 $78 Variable per unit Fixed per month $3 $560,000 Manufacturing costs: $15 Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead cost per unit Fixed manufacturing overhead cost per month $1 $756,000 Management is anxious to see how profitable the new camp cot will be and has asked that an income statement be prepared for May. Required . Assume that the company uses absorption costing a. Determine the unit product cost. it product cost b. Prepare an income statement for May High Country, Inc. Absorption Costing Income Statement

Solution

1. absorption costing:

unit product cost:$43

b.income statement under absorption costing:

2. variable costing:

unit product cost:$25.

2.b.

contribution format income statement:

direct material per unit	$15
direct labour per unit	$9
variable manufacturing cost per unit	$1
fixed manufacturing cost per unit (756,000 / 42,000)	$18
unit product cost	$43