Solution-Compute the contribution margin and operating

Compute the contribution margin and operating income

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Reference no: EM132540244

Company is a manufacturer of facial cream. The company was established one year ago with the long term objective of dominating the market share within the next ten years.

The company recently employed a cost accountant, Josephine, who are required to analyze the cost data of the company as well as the submission of reports to the management for decision making purpose. In preparing the related income statements for the year of 2019, she needed the following information.

Sales: 30,000 units at the selling price of $60 per unit

Actual production during the year: 35,000 units

Manufacturing costs incurred during the year:

Variable: $525,000

Fixed: $367,500

Marketing costs incurred during the year:

Variable: $150,000

Fixed: $85,000

Required:

Question a. Compute the contribution margin and operating income by applying the variable costing approach.

Question b. Compute the gross margin and operating income by applying the absorption costing approach.

Question c. Explain why operating income is not the same under the two approaches.

Reference no: EM132540244

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Compute the contribution margin and operating income

Reference no: EM132540244

Reference no: EM132540244

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