High Country, Incorporated, 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 45,000 Units sold 40,000 Selling price per unit $ 79 Selling and administrative expenses: Variable per unit $ 3 Fixed (per month) $ 555,000 Manufacturing costs: Direct materials cost per unit $ 16 Direct labor cost per unit $ 7 Variable manufacturing overhead cost per unit $ 4 Fixed manufacturing overhead cost (per month) $ 720,000 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.
High Country, Incorporated, 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 45,000 Units sold 40,000 Selling price per unit $ 79 Selling and administrative expenses: Variable per unit $ 3 Fixed (per month) $ 555,000 Manufacturing costs: Direct materials cost per unit $ 16 Direct labor cost per unit $ 7 Variable manufacturing overhead cost per unit $ 4 Fixed manufacturing overhead cost (per month) $ 720,000 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.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter18: Pricing And Profitability Analysis
Section: Chapter Questions
Problem 3CE: Pattison Products, Inc., began operations in October and manufactured 40,000 units during the month...
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High Country, Incorporated, 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 | 45,000 |
| Units sold | 40,000 |
| Selling price per unit | $ 79 |
| Selling and administrative expenses: | |
| Variable per unit | $ 3 |
| Fixed (per month) | $ 555,000 |
| Direct materials cost per unit | $ 16 |
| Direct labor cost per unit | $ 7 |
| Variable manufacturing overhead cost per unit | $ 4 |
| Fixed manufacturing overhead cost (per month) | $ 720,000 |
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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Step 1: Introduce to Absorption Costing and Variable Costing Method
VIEWStep 2: Working for sales revenue, fixed manufacturing overhead per unit and variable S&A expenses
VIEWStep 3: Working for unit product cost, cost of goods sold and selling and administrative expenses using abso
VIEWStep 4: Working for unit product cost and variable cost of goods sold using variable costing method
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