Problem 6-20 (Algo) Variable and Absorption Costing Unit Product Costs and Income Statements; Explanation of Difference in Net Operating Income [LO6-1, LO6-2, LO6-3]

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 plants operation:

Beginning inventory		0
Units produced		45,000
Units sold		40,000
Selling price per unit	$	76
Selling and administrative expenses:
Variable per unit	$	2
Fixed (per month)	$	558,000
Manufacturing costs:
Direct materials cost per unit	$	17
Direct labor cost per unit	$	6
Variable manufacturing overhead cost per unit	$	3
Fixed manufacturing overhead cost (per month)	$	765,000

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.

Complete this question by entering your answers in the table below. Req 1A Req 1B Reg 2A Reg 2B Determine the unit product cost. Assume that the company uses absorption costing. Unit product cost Complete this question by entering your answers in the table below. Reg 1A Reg 1B Reg 2A Reg 2B Prepare an income statement for May. Assume that the company uses absorption costing. High Country, Inc. Absorption Costing Income Statement Complete this question by entering your answers in the table below. Req 1A Reg 1B Reg 2A Reg 2B Determine the unit product cost. Assume that the company uses variable costing. Unit product cost Complete this question by entering your answers in the table below. Reg 1A Reg 1B Req 2A Req 2B Prepare a contribution format income statement for May. Assume that the company uses variable costing. High Country, Inc. Variable Costing Income Statement