High Country, Inc., produces and sells many recreational products. The company h

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:

Management is anxious to see how profitable the new camp cot will be and has asked that an income statement be prepared for May.

  

         

         

  

         

         

  Beginning inventory 0      Units produced 40,000      Units sold 35,000      Selling price per unit $83      Selling and administrative expenses:     Variable per unit $2        Fixed per month $ 564,000      Manufacturing costs:     Direct materials cost per unit $18        Direct labor cost per unit $8        Variable manufacturing overhead cost per unit $1        Fixed manufacturing overhead cost per month $ 760,000   

Explanation / Answer

calculation of unit product cost:

Absorption costing (1a) Variable costing (2a) Direct material 16 16 Labor 8 8 Variable overhead 1 1 Fixed overhead 19 [760,000/40,000] - Total unit cost 44 25

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