Problem 6-20 Variable and Absorption Costing Unit Product Costs and Income State
ID: 2514822 • Letter: P
Question
Problem 6-20 Variable and Absorption Costing Unit Product Costs and Income Statements Explanat 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 40,000 35,000 $80 Selling and administrative expenses Variable per unit Fixed per month $3 569,000 Manufacturing costs: Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead cost per unit Fixed manufacturing overhead cost per month $15 $10 $1 $640,000 Management is andous to see how profitable the new camp cot will be and has asked that an income statement be prepared for May Required e that the company uses absorption costing a. Determine the unit product cost. Unit product cost b. Prepare an income statement for May High Country, Inc. Absorption Costing Income StatementExplanation / Answer
1a) Unit product cost under absorption costing Direct materials 15 direct labor 10 variable MOH 1 Fixed MOH (640,000/40,000) 16 unit product cost 42 answer 1b) Absorption costing income statement sales (35000*80) 2800000 cost of goods sold (35000*42) 1470000 Gross profit 1330000 selling & administrative expense variable selling&adm expense 105000 fixed selling & adm expense 569,000 674,000 Net income 656,000 2a) unit product cost under variable costing Direct materials 15 direct labor 10 variable MOH 1 unit product cost under variable costing 26 2b) Contribution format Sales 2800000 less variable expense cost of goods sold 910000 selling and adm expense 105000 1015000 Contribtution margin 1785000 fixed expense fixed MOH 640,000 Fixed selling & adm expense 569000 1,209,000 Net income 576,000