Question

In: Accounting

Dilia Company incurred manufacturing overhead cost for the year as follows: Direct materials $ 50 /unit...

Dilia Company incurred manufacturing overhead cost for the year as follows:

Direct materials $ 50 /unit
Direct labor $ 35 /unit
Manufacturing overhead
Variable $ 15 /unit
Fixed ($25/unit for 1,500 units) $ 37,500
Variable selling and administrative expenses $ 10,500
Fixed selling and administrative expenses $ 20,000

The company produced 1,500 units and sold 1,200 of them at $225 per unit. Assume that the production manager is paid a 2 percent bonus based on the company’s net income.

Required

Prepare an income statement using absorption costing.

Prepare an income statement using variable costing.

Determine the manager’s bonus using each approach. Which approach would you recommend for internal reporting?

Solutions

Expert Solution

Solution:

Income Statement - Absorption Cosing - Dilia Company
Particulars Details Amount
Sales $270,000.00
Cost of Goods Sold:
Cost of goods produced $187,500.00
Add: Opening Inventory $0.00
Less: Ending Inventory $37,500.00 $150,000.00
Gross Profit $120,000.00
Variable Selling & Administrative Expenses $10,500.00
Fixed Selling & Administrative Expenses $20,000.00
Net Operating Income $89,500.00

Manager's Bonus = $89,500 * 2% = $1,790

Variable costing income statement - Dilia Company
Particulars Details Amount
Sales 1200*$225 $270,000.00
Variable Cost:
Variable manufacturing cost 1200*$100 $120,000.00
Variable Selling and Administrative Expenses $10,500.00
Contribution $139,500.00
Fixed Manufacturing Overhead $37,500.00
Fixed Selling & Administrative Expenses $20,000.00
Net Income $82,000.00

Manager's Bonus = $82,000 * 2% = $1,640

For internal reporting i would recommend variable costing apporach.


Related Solutions

Dilia Company incurred manufacturing overhead cost for the year as follows: Direct materials $ 50 /unit...
Dilia Company incurred manufacturing overhead cost for the year as follows: Direct materials $ 50 /unit Direct labor $ 35 /unit Manufacturing overhead Variable $ 15 /unit Fixed ($25/unit for 1,500 units) $ 37,500 Variable selling and administrative expenses $ 10,500 Fixed selling and administrative expenses $ 20,000 The company produced 1,500 units and sold 1,200 of them at $225 per unit. Assume that the production manager is paid a 2 percent bonus based on the company’s net income. Required...
Shellborn Company incurred manufacturing overhead cost for the year as follows. Direct materials $ 39.50 /unit...
Shellborn Company incurred manufacturing overhead cost for the year as follows. Direct materials $ 39.50 /unit Direct labor $ 27.10 /unit Manufacturing overhead Variable $ 10.30 /unit Fixed ($19.70/unit for 1,100 units) $ 21,670 Variable selling and administrative expenses $ 3,660 Fixed selling and administrative expenses $ 14,200 The company produced 1,100 units and sold 600 of them at $180.60 per unit. Assume that the production manager is paid a 1 percent bonus based on the company’s net income. Required...
Adams Company incurred manufacturing overhead cost for the year as follows. Direct materials $ 38.70 /unit...
Adams Company incurred manufacturing overhead cost for the year as follows. Direct materials $ 38.70 /unit Direct labor $ 26.10 /unit Manufacturing overhead Variable $ 10.90 /unit Fixed ($20.10/unit for 1,500 units) $ 30,150 Variable selling and administrative expenses $ 7,700 Fixed selling and administrative expenses $ 15,400 The company produced 1,500 units and sold 1,000 of them at $181.00 per unit. Assume that the production manager is paid a 3 percent bonus based on the company’s net income. Required...
Rundle Company incurred manufacturing overhead cost for the year as follows. Direct materials $ 39.20 /unit...
Rundle Company incurred manufacturing overhead cost for the year as follows. Direct materials $ 39.20 /unit Direct labor $ 28.00 /unit Manufacturing overhead Variable $ 10.40 /unit Fixed ($18.50/unit for 1,700 units) $ 31,450 Variable selling and administrative expenses $ 9,600 Fixed selling and administrative expenses $ 14,300 The company produced 1,700 units and sold 1,200 of them at $181.70 per unit. Assume that the production manager is paid a 2 percent bonus based on the company’s net income. Required...
Franklin Company incurred manufacturing overhead cost for the year as follows: Direct materials $ 38.20 /unit...
Franklin Company incurred manufacturing overhead cost for the year as follows: Direct materials $ 38.20 /unit Direct labor $ 27.10 /unit Manufacturing overhead Variable $ 10.50 /unit Fixed ($19.20/unit for 1,300 units) $ 24,960 Variable selling and administrative expenses $ 6,160 Fixed selling and administrative expenses $ 14,300 The company produced 1,300 units and sold 800 of them at $180.30 per unit. Assume that the production manager is paid a 2 percent bonus based on the company’s net income. Required...
Variable Cost Per Unit: Manufacturing: Direct Materials = $20 Direct Labor = $12 Variable Manufacturing Overhead...
Variable Cost Per Unit: Manufacturing: Direct Materials = $20 Direct Labor = $12 Variable Manufacturing Overhead = $4 Variable Selling and Administrative = $2 Fixed costs per year: Fixed manufacturing overhead = $960,000 Fixed selling and administrative expenses = $240,000 During its first year of Operations, produced 60,000 units and sold 60,000 units. During it's second year of operations, it produced 75,000 and sold 50,000 units. In its third year, it produced 40,000 units and sold 65,000 units. The selling...
The following costs were incurred in April: Direct materials $45,300 Direct labor $23,800 Manufacturing overhead $17,500...
The following costs were incurred in April: Direct materials $45,300 Direct labor $23,800 Manufacturing overhead $17,500 Selling expenses $16,800 Administrative expenses $30,200 Prime costs during the month totaled: ? $41,300 ? $69,100 ? $86,600 ? $133,600
Case Prime Cost Conversion Cost Direct Materials Direct Labor Manufacturing Overhead Total Manufacturing Cost A 9,480...
Case Prime Cost Conversion Cost Direct Materials Direct Labor Manufacturing Overhead Total Manufacturing Cost A 9,480 16,460 4,040 11,020 B 10,010 7,330 25,200 42,540 C 55,700 110,300 42,300 D 48,150 19,900 11,750 68,050 E 14,000 24,300 56,200 For each of the following independent cases (A–E), compute the missing values in the table:
Variable costs per unit: Manufacturing: Direct materials $ 27 Direct labor $ 13 Variable manufacturing overhead...
Variable costs per unit: Manufacturing: Direct materials $ 27 Direct labor $ 13 Variable manufacturing overhead $ 2 Variable selling and administrative $ 1 Fixed costs per year: Fixed manufacturing overhead $ 320,000 Fixed selling and administrative expenses $ 90,000 During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $58 per unit. Assume...
Morton Company has two divisions. Sales, direct materials cost, direct labor cost, and manufacturing overhead data...
Morton Company has two divisions. Sales, direct materials cost, direct labor cost, and manufacturing overhead data for Morton’s two divisions are available below. Note: All of Morton Company’s products are sold in competitive markets.                                                                     Missile                                Salt                                                                  Products                       Products Sales                                                     $1,500,000                    $1,000,000 Direct labor                                            (800,000)                       (300,000) Direct materials                                     (100,000)                         (40,000) Manufacturing overhead*                    (400,000)                       (150,000) Gross profit                                            $200,000                        $510,000    *Manufacturing overhead is allocated to production based on the amount of direct labor cost.            Morton has determined that its total...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT