Problem P7-1A

# Problem P7-1A - has asked for an income statement...

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P7-1A 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
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Unformatted text preview: 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....
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