DC and Marvel would like to evaluate one of the product lines that they sell to defense department. Every month the Stark and Company produce an identical number of units, although the sales in units 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 Contribution Margin.

2)     Compute the Operating Income under Variable Costing.

3)     Prepare a reconciliation from your Variable Costing Operating Income to compute Operating Income under absorption costing.

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