Abbott Suit Corporation (ASC) manufactures BOTH nylon AND cotton jogging suits. On 1/1/18, Erin Rogers ESTIMATES the following costs:
Rent on corporate headquarters $20,000
Salaries for CEO, cost accountant, administrative staff $10,000
Depreciation for cost accountant’s printer $10,000
Abbott Suit Corporation use MACHINE HOURS TO ALLOCATE OVERHEAD (i.e. its VPDOH = $10/mh).
Erin Rogers, UW-M graduate, creates the following standards for the two jogging suits:
Nylon Jogging Suits |
Cotton Jogging Suits |
|||
Std.qty/suit |
Std.price/input |
Std.qty/suit |
Std.price/input |
|
Direct Materials |
2 yds/suit |
$10/yd |
3 yds/suit |
$20/yd |
Direct Labor |
5 dlh/suit |
$8/dlh |
4 dlh/suit |
$5/dlh |
VOH |
2 mh/suit |
$10/mh |
4 mh/suit |
$10/mh |
Abbott Suit Believes that it can sell Nylon Jogging Suits for $180/suit and Cotton Jogging suits for $280/suit. Abbott Suit has a goal operating income of $60,000 and believe that it will sell 4 times as many Cotton jogging suits as nylon suits.
Cotton Jogging Suits: 0 suits
Nylon Jogging Suits 0 suits
And ASC BUDGETS the following end balances:
Cotton Jogging Suits 2000 suits
Nylon Jogging Suits 500 suits
REQUIRED: indicate how many cotton and nylon jogging suits ASC is budgeted to make in 2018.
Calcualtion of weighted average contribution margin | |||
Nylon | Cotton | Total | |
Selling price | 180 | 280 | |
Less: variable costs | |||
Direct Material | 20 | 60 | |
Direct Labor | 40 | 20 | |
Variable Overhead | 20 | 40 | |
Total variable cost | 80 | 120 | |
Contribution Margin per Unit | 100 | 160 | |
Sales Mix | 1 | 4 | 5 |
Contribution Margin | 100 | 640 | 740 |
Weighted average CM | 148 | ||
Units required to be sold = (Desired Operating Income + Fixed costs)/Weighted average Contribution Margin | |||
=(60,000+40,000)/148 | |||
675.6756757 | Units | ||
Nylon | 135.14 | Units | |
Cotton | 540.54 | Units | |
Nylon | Cotton | ||
Budgeted Sales Units | 135.14 | 540.54 | |
Add: desired Ending Inventory | 500 | 2000 | |
Total required | 635.14 | 2540.54 | |
Less: Beginning Inventory | 0 | 0 | |
Budgeted Production | 635.14 | 2540.54 |
Get Answers For Free
Most questions answered within 1 hours.