Question

Carbon Company provides the following information about resources:

	Unused Resources Capacity			Cost Driver Volume
Resources used
Materials	$	2,100		8,000	pounds
Energy		1,260		390	machine-hours
Setups		0		83	setups
Purchasing		2,300		100	purchase orders
Customer service		3,200		90	returns
Long-term labor		4,180		340	labor-hours
Administrative		4,780		440	labor-hours
Resources supplied
Materials	$	98,100
Energy		21,540
Setups		23,240
Purchasing		26,300
Customer service		15,800
Long-term labor		29,000
Administrative		30,300

Sales revenue for Carbon Company is $610,000.  

Required:  

a. Prepare a traditional income statement.

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Total Cost		???
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b. Prepare an activity-based income statement.

   Activity Based Income Statement

	Resources Used	Unused Resource Capacity	Resources Supplied
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Costs
Unit
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	$ ???	$????	$????
Batch
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	$???	$???	$???
Product and Customer sustaining
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	$???	$???	$???
Capacity Sustaining
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	$???	$???	$???
Total Costs	$???	$????	$????	???
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Answer 1

Solution:

Given:

	Resources Used			Resources Supplied			Unused Resources (Resources Supplied - Resources Used)
Materials	$	96,000		$	98,100		$ 2,100
Energy		20,280			21,540		1,260
Setups		23,240			23,240		0
Purchasing		24,000			26,300		2,300
Customer service		12,600			15,800		3,200
Long-term labor		24,820			29,000		4,180
Administrative		25,520			30,300		4,780
Total		226,460		244,280			$ 17,820

a. Traditional income statement

Sales Revenue		$610,000
Materials	$ 98,100
Energy	$ 21,540
Setups	$23,240
Purchasing	$ 26,300
Customer service	$ 15,800
Long-term labor	$ 29,000
Administrative	$ 30,300
Total Cost		$ 244,280
Operating Profit		$ 365,720

b. Activity Based Income Statement

  

	Resources Used	Unused Resource Capacity	Resources Supplied
Sales Revenue				$610,000
Costs
Unit
Energy	$ 20,280	$ 1,260	$ 21,540
Materials	$ 96,000	$ 2,100	$ 98,100
Purchasing	$ 24,000	$ 2,300	$ 26,300
Total	$ 140,280	$ 5,660	$ 145,940
Batch
Setups	$ 23,240	0	23,240
Total	$ 23,240	0	$ 23,240
Product and Customer sustaining
Customer service	$ 12,600	$ 3,200	$ 15,800
Total	$ 12,600	$ 3,200	$ 15,800
Capacity Sustaining
Administrative	$ 25,520	$ 4,780	30,300
Long-term labor	$ 24,820	$4,180	$ 29,000
Total	$50,340	$8,960	$59,300
Total Costs	$226,460	$17,820	$ 244,280	$ 244,280
Operating Profit				$ 365,720