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Calculate the manufacturing cost per unit

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Reference no: EM131809438

Question - Blue Mountain Products manufactures and sells a variety of camping products. Recently the company opened a new plant to manufacture a light-weight, self-standing tent. Cost and sales data for the first month of operations are shown below:

Manufacturing costs:

Fixed overhead $200,000

Variable overhead $4 per tent

Direct labor $16 per tent

Direct materials $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, do the following.

(i) Calculate the manufacturing cost per unit.

(ii) Prepare an absorption costing income statement for the month of June 2005.

(b) Assuming the company uses variable costing, do the following.

(i) Calculate the manufacturing cost per unit.

(ii) Prepare a variable costing income statement for the month of June 2005.

(c) Reconcile the difference in net income between the two methods.

Reference no: EM131809438

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