Acc349 Managerial Accounting: P7-1A Blue Mountain Products manufactures and sells

Acc349 Managerial Accounting
Problem 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 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)(i) Assuming the company uses absorption costing, calculate the manufacturing cost per unit.
(a)(ii) Assuming the company uses absorption costing, prepare an absorption costing income statement for the month of June 2005.
(b)(i) Assuming the company uses variable costing, calculate the manufacturing cost per unit.
(b)(ii) Assuming the company uses variable costing, prepare an variable costing income statement for the month of June 2005.
(c) Reconcile the difference in net income between the two methods.
Powered by