Question

# Abbott Suit Corporation (ASC) manufactures BOTH nylon AND cotton jogging suits. On 1/1/18, Erin Rogers ESTIMATES...

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.

1. On 1/1/18, ASC has the following balances:

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

#### Earn Coins

Coins can be redeemed for fabulous gifts.