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





Direct Materials

2 yds/suit


3 yds/suit


Direct Labor

5 dlh/suit


4 dlh/suit



2 mh/suit


4 mh/suit


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.

Homework Answers

Answer #1
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
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
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