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DC and Marvel would like to evaluate one of the product lines that they sell to...

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Accounting

DC and Marvel would like to evaluate one of the product linesthat they sell to defense department. Every month the Stark andCompany produce an identical number of units, although the sales inunits differ from month to month.

Selling price

$111

109

Units in beginning inventory

400

360

Units produced

8,800

6900

Units sold

8,900

7200

Variable costs per unit:

     Direct materials

$34

29

     Direct labour

$37

31

     Variable manufacturing overhead

$3

2

     Variable selling and administrative

$9

7

Fixed costs:

     Fixed manufacturing overhead

$61,600

53,500

     Fixed selling and administrative

$169,100

145,000

Required:

1)     Compute the total ContributionMargin.

2)     Compute the Operating Income underVariable Costing.

3)     Prepare a reconciliation from yourVariable Costing Operating Income to compute Operating Income underabsorption costing.

Answer & Explanation Solved by verified expert
3.9 Ratings (615 Votes)

Assuming both are different situation
ans 1
Variable costing income statement
Sales 987900 799200
(8900*111) (7200*111)
Variable costs per unit:
     Direct materials 302600 208800
(8900*34) (7200*29)
     Direct labour 329300 223200
(8900*37) (7200*31)
     Variable manufacturing overhead 26700 14400
(8900*3) (7200*2)
     Variable selling and administrative 80100 64800
(8900*9) (7200*9)
Total variable cost 738700 511200
Contribution margin 249200 288000 ans 1
Fixed costs:
     Fixed manufacturing overhead $61,600 53,500
     Fixed selling and administrative $169,100 145,000
Net operating Income $18,500 $89,500 ans 2
ans 3
Income under variable costing $18,500 $89,500
Add: Deferred Fixed manufacturing overhead in ending inventory 2100 465
Income under absorption costing $20,600 $89,965
working
Fixed manufacturing overhead deferred
2100 465
61600/8800*300 53500/6900*60

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