Consider the Following Cost and Production Information for Keenan Electronic

Essay

Consider the following cost and production information for Keenan Electronic Components, Inc.

Additional information:
? Sales revenue: $10,400,000
? Beginning inventory: $575,000
? The only spending increase was for material cost due to increased production. All other spending as shown above was unchanged.
? Sales of all parts are the same as the number of units produced.
(a) Compute the contribution margin, operating income, and ending inventory for Keenan Electronic Components, Inc.
(b) Assume that production of part D-1251 increases by 25 units during the given period (sales remain constant). Re-compute the above figures.
(c) Charles Simek, the cost manager of Keenan Electronic Components, argues with the controller that throughput costing is a better method for product costing. Using the information in part b above, re-compute the operating income for Hi-tec using throughput costing. Explain any differences in the operating incomes obtained under the two different methods.