PROBLEM 6-20 Variable and Absorption Costing Unit Product Costs and Income Statements, Explore 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: figures loa 2. 3. 1. Using variable What is the variable costing net op Reconcile the absorption costing and the variable each year. tion of Difference in Net Operating Income L06-1, LO6-2, L06-3 0 10,000 8,000 $75 $6 $200,000 Beginning inventory Units produced Units sold Selling price per unit Selling and administrative expenses: Variable per unit Fixed (per month) Manufacturing costs: Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead cost per unit Fixed manufacturing overhead cost (per month) $20 $8 $2 $100,000 a. Management is anxious to assess the profitability of the new camp cot during the mom of May. Required: 1. Assume that the company uses absorption costing. Calculate the unit product cost. b. Prepare an income statement for May. 2. Assume that the company uses variable costing. Calculate the unit product cost. b. Prepare a contribution format income statement for May. 3. Explain the reason for any difference in the ending inventory balances under the two costing methods and the impact of this difference on reported net operating income. a