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 36,000 Units sold 31,000 Selling price per unit $ 75 Selling and administrative expenses: Variable per unit $ 4 Fixed (per month) $ 563,000 Manufacturing costs: Direct materials cost per unit $ 14 Direct labor cost per unit $ 7 Variable manufacturing overhead cost per unit $ 3 Fixed manufacturing overhead cost (per month) $ 684,000Management is anxious to see how profitable the new camp cot will be and has asked that an income statement be prepared for May. Assume that the company uses absorption costing. (a) Determine the unit product cost. (b) Prepare an income statement for May.

Question

Lailah George

Business

11 August, 10:53

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 36,000 Units sold 31,000 Selling price per unit $ 75 Selling and administrative expenses: Variable per unit $ 4 Fixed (per month) $ 563,000 Manufacturing costs: Direct materials cost per unit $ 14 Direct labor cost per unit $ 7 Variable manufacturing overhead cost per unit $ 3 Fixed manufacturing overhead cost (per month) $ 684,000Management is anxious to see how profitable the new camp cot will be and has asked that an income statement be prepared for May. Assume that the company uses absorption costing. (a) Determine the unit product cost. (b) Prepare an income statement for May.

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Answers (1)

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Alexandria Casey · Answer 1

Product unit cost = $43/unit

Explanation:

Product unit cost=?

a. Direct material per unit = 14

b. Direct labor per unit = 7

c. Variable manufacturing overhead cost per unit = 3

Fixed manufacturing overhead = 684000

d. Fixed manufacturing overhead per unit = fixed manufacturing overhead / units produced.

= 684000 / 36000 = 19/unit

we know that: Product unit cost per unit = a+b+c+d

=14+7+3+19

=$43 per unit.

High Country lnc

Income statement

For the m/o may

$

Sales (31000*75) = 2325000

less: Cost of goods sold (31000*43) = (1333000)

Gross margin 992000

Less: selling and administrative expense

Fixed selling and administrative expense=563000 (a)

Variable selling and administrative expense

($4 * units sold) = $4 * 31000 = 124000 (b)

Total (a+b) = (687000)

Net income 305000