Question $3(34$ marks: $60$ minutes$)$

Last year, JKL Company produced $20,000$ units and sold $18,000$ units at a price of $$14.$ Costs

for last year were as follows:

Direct labor $44,000$

Direct materials $22,000$

Fixed administrative expense $15,500$

Fixed factory overhead $37,000$

Fixed selling expense $7,500$

Variable factory overhead $12,000$

Variable selling expense $9,000$

Fixed factory overhead is applied based on expected production. Last year, JKL expected to

produce $20,000$ units.

Required:

a$)$ Assuming that there is no beginning inventory, what is the value of ending inventory under

absorption costing?

$(8$ marks$)$

b$)$ Assuming that there is no beginning inventory, what is the value of ending inventory under

variable costing?

$(6$ marks$)$

c$)$ What is the operating income for last year under absorption costing?

$(7$ marks$)$

d$)$ What is the operating income for last year under variable costing?

$(9$ marks$)$

e$)$ What is the difference between contribution margin and segment margin?

$(4$ marks$)$