General Shop began as a maker of industrial drafting equipment. After several successful years, the company...

General Shop began as a maker of industrial drafting equipment. After several successful years, the company has graduated into making two popular products: a plotter and a 3D printer. Both products have the same variable costs as shown below.

Variable costs per unit:

Direct materials	$ 70
Direct labour	$130
Variable manufacturing overhead	$ 30
Sales Commission	$ 20
Total	$250

In order to maintain good customer service, General Shop keeps about 500 units of each product on hand as warehouse inventory.

The company has a long-term contract to rent manufacturing equipment and the necessary space for $9,000,000 per year. General & administrative costs amount to $2,100,000 per year.

Costs and unit sales are expected to be consistent from last year to the current year. Based on last years’ results, General Shop expects to sell 10,000 units of each product this year. The plotters are priced at $800 and the 3D printers at $1,000.

Jennifer, president of the company, is considering how best to motivate her managers. She feels it is fair to provide bonuses once the company’s operating income is 5% above the expected operating income.

Required:

Prepare a contribution format income statement for General Shop using variable costing.
Prepare an income statement for General Shop using absorption costing.

Solutions

Expert Solution

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

PART 1: Arequipa Enterprises (AE) began as a maker of industrial drafting equipment. After several successful...

PART 1: Arequipa Enterprises (AE) began as a maker of industrial drafting equipment. After several successful years, the company has graduated into making two popular products: a plotter and a 3D printer. Both products have the same variable costs as shown below. Variable costs per unit: Direct materials $ 70 Direct labour $130 Variable manufacturing overhead $ 30 Sales Commission $ 20 Total $250 In order to maintain good customer service, AE keeps about 500 units of each product on...

Selco, a U.S. Company, imports and exports tools, shop equipment, and industrial construction supplies. The company...

Selco, a U.S. Company, imports and exports tools, shop equipment, and industrial construction supplies. The company uses a periodic inventory system. During April the company entered into the following transactions. All rate quotations are direct exchange rates. April 3 Purchased power tools from a wholesaler in Japan, on account, at an invoice cost of 1,600,000 yen. On this date the exchange rate for the yen was $.0072. 5 Sold hand tools on credit that were manufactured in the U.S. to...

After operating a successful US hotel corporation (H Corp) for several years, Donald decides to set...

After operating a successful US hotel corporation (H Corp) for several years, Donald decides to set up a wholly owned subsidiary in the export business (X Corp). His initial investment in this corporation is $1,000. Through a stroke of luck, the US tax laws change and X Corp becomes worth $100,000 overnight, even though its balance still only reflects $1,000 cash and $1,000 equity. Donald is considering selling the operation but is concerned about the tax ramifications. a. What would...

A company is selling an equipment after four years for $48,887. The equipment was originally purchased...

A company is selling an equipment after four years for $48,887. The equipment was originally purchased for $110,475. The tax rate is 22%.The equipment is classified as a 5-year property. What is the after-tax salvage value?

After working for a software company for several years, Chris and Terry quit their jobs and...

After working for a software company for several years, Chris and Terry quit their jobs and set up their own consulting firm called C & T Software, Inc. Major customers include corporate, professional, and government organizations that are setting up information networks. The cost per billable hour of service at the company’s normal volume of 3,000 billable hours per month follows. (A billable hour is one hour billed to a client.) Average cost per hour billed to client: Variable labor—consultants...

International Roofing Systems (IRS) Company began operations several years ago. At the end of 2017, the...

International Roofing Systems (IRS) Company began operations several years ago. At the end of 2017, the only existing temporary differences were the difference described in (e) and (f) below (hint: this creates balances at the end of 2017 in the deferred tax balance sheet accounts). In addition, there are four other tax differences arising in 2018 and 2019. These differences are as follows: Interest revenue earned on an investment in tax-exempt municipal bonds is $34,000 each year. In 2018, pretax...

Dazzling Company manufactures women jewelry. The company began operations several years ago and has experienced rapid...

Dazzling Company manufactures women jewelry. The company began operations several years ago and has experienced rapid sales growth. The company is organized by business function, with vice-presidents for manufacturing, marketing, finance, accounting, and general administration. The firm operates a computer network, which supports a variety of applications for manufacturing, marketing, finance, accounting and general administration. The manager of information systems (IS) reports to the vice-president of general administration. The company’s rapid growth has strained the firm’s computer resources, and the...

Dazzling Company manufactures women jewelry. The company began operations several years ago and has experienced rapid...

You are the CEO of a mid-size manufacturing company that produces sporting equipment. For several years,...

You are the CEO of a mid-size manufacturing company that produces sporting equipment. For several years, you have been struggling to keep your company profitable in an increasingly competitive market. The company is the major employer in your small city of 35,000 people. It is critical to the city’s economy. Recently, a major sporting equipment company informed you of their desire to acquire your company. There are many possible advantages to such an acquisition. It could save the company. A...

A company purchases a piece of equipment for $15,000. After nine years, the salvage value is...

A company purchases a piece of equipment for $15,000. After nine years, the salvage value is $900. The annual insurance cost is 5% of the purchase price, the electricity cost is $600/yr, and the maintenance and replacement parts cost is $120/yr. The nominal annual interest rate is 9.6%, compounded monthly. Neglecting taxes, what is most nearly the present worth of the equipment if it is expected to earn the company $4500 per year? $2300 $2800 $3200 $3500

Subjects