DC-Marvel would like to evaluate one of the product lines that they sell to defense department. Every month the company produces an identical number of units, although the sales in units differ from month to month.

Selling price $109

Units in beginning inventory 360

Units produced 6,900

Units sold 7,200

Variable costs per unit:

Direct materials $29

Direct labour $31

Variable manufacturing overhead $2

Variable selling and administrative $7

Fixed costs:

Fixed manufacturing overhead $53,500

Fixed selling and administrative $145,000

Compute the Contribution Margin.

Compute the Operating Income under Variable Costing.

Reconciliation from your Operating Income under Variable Costing to Operating Income under Absorption Costing. Show the differences between each method.