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 0Units produced 39,000Units sold 34,000Selling price per unit$80Selling and administrative expenses: Variable per unit$3Fixed (per month)$559,000Manufacturing costs: Direct materials cost per unit$16Direct labor cost per unit$8Variable manufacturing overhead cost per unit$2Fixed manufacturing overhead cost (per month)$780,000 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. Calculate the unit product cost.b. Prepare an income statement for May.2. Assume that the company uses variable costing.a. Calculate the unit product cost.b. Prepare a contribution format income statement for May.

Name: High Country, Inc., produces and sells many recreational products. The
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Description: 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

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Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter7: Variable Costing For Management analysis

Section: Chapter Questions

Problem 3E: Fresno Industries Inc. manufactures and sells high-quality camping tents. The company began...

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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 relate to May, the first month of the plant’s operation:


Beginning inventory		0
Units produced		39,000
Units sold		34,000
Selling price per unit	$	80
Selling and administrative expenses:
Variable per unit	$	3
Fixed (per month)	$	559,000
Manufacturing costs:
Direct materials cost per unit	$	16
Direct labor cost per unit	$	8
Variable manufacturing overhead cost per unit	$	2
Fixed manufacturing overhead cost (per month)	$	780,000

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. Calculate the unit product cost.

b. Prepare an income statement for May.

2. Assume that the company uses variable costing.

a. Calculate the unit product cost.

b. Prepare a contribution format income statement for May.

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