Question

Decko Industries reported the following monthly data:

Units produced		66,000	units
Sales price	$	47	per unit
Direct materials	$	2.90	per unit
Direct labor	$	3.90	per unit
Variable overhead	$	4.90	per unit
Fixed overhead	$	235,400	in total

What is the company's contribution margin for this month if 64,000 units were sold?

part b

Kluber, Inc. had net income of $906,000 based on variable costing. Beginning and ending inventories were 55,600 units and 53,200 units, respectively. Assume the fixed overhead per unit was $1.55 for both the beginning and ending inventory. What is net income under absorption costing?

part c

Zhang Industries budgets production of 450 units in June and 460 units in July. Each finished unit requires 5 pounds of raw material K, which costs $6 per pound. Each month’s ending inventory of raw materials should be 20% of the following month’s budgeted production. The June 1 raw materials inventory has 450 pounds of raw material K. Compute budgeted cost of purchases for raw material K for June

Answer 1

Decko Industries

Sales	$   3,008,000
Variable Expenses	$      748,800
Contribution Margin	$   2,259,200

Kluber Inc.

Reconciliation
Income as per Variable Costing	$ 906,000
Add : Fixed Manufacturing Overhead carried forward	$         82,460
Less : Fixed Manufacturing Overhead released	$         86,180
Income as per Absorption Costing	$ 902,280

Zhang Industries

Direct Material Budget
	June	July
Production Required	450	460
Raw Material Per unit	5	5
Raw Material for Production	2250	2300
Add : Closing Stock Required	460
Total Material Required	2710
Less : Opening Stock	450
Material to be purchased	2260
Rate per pound	$             6.00
Purchase Cost	$         13,560