Blue Mountain Products manufactures and sells a variety of camping products. Recently, the company opened a new plant to manufacture a lightweight, self-standing tent. Cost and sales data for the first month of operations (June 2012) are as follows:
Manufacturing costs
Fixed overhead ................................................................ $200,000
Variable overhead ............................................................ $4 per tent
Direct labour ................................................................ $16 per tent
Direct material .............................................................. $40 per tent
Beginning inventory .............................................................. 0 tents
Tents produced ................................................................... 10,000
Tents sold ............................................................................ 9,000
Selling and administrative costs
Fixed ............................................................................ $400,000
Variable ................................................................. $6 per tent sold
The tent sells for $150. Management is interested in the opening month's results and has asked for an income statement.
Instructions
(a) Assuming the company uses absorption costing:
1. Calculate the manufacturing cost per unit.
2. Prepare an absorption-costing income statement for the month of June 2012.
(b) Assuming the company uses variable costing:
1. Calculate the manufacturing cost per unit.
2. Prepare a variable-costing income statement for the month of June 2012.
(c) Reconcile the difference in net income between the absorption-costing and variable-costing methods.
(d) Assuming the company uses throughput costing:
1. Calculate the manufacturing cost per unit.
2. Prepare a throughput-costing income statement for the month of June 2012.
(e) Reconcile the difference in net income between the variable-costing and throughput-costing methods.